Ecommerce In Africa

By Angus  |  1 Dec 2014 13:00:00

Offshore Ecommerce In Africa

To celebrate Sellr’s integration with Pesapal, a move which will give our merchants access to some of the most exciting developing markets for ecommerce, this blog post is going to focus on the opportunities and potential issues facing online merchants seeking to grow their business on the African continent.

Opportunities:

The ecommerce start up landscape in certain African countries is flourishing at the moment, with the most notable opportunities being in Nigeria and Kenya. Whilst it would be overly optimistic to suggest that the industry isn’t still very much in its infancy, African based retailers such as Jumia.com and Gloo.ng are leading the way in terms of conditioning the population to buy online.

Whilst there are reasons, which I shall go into in the next section, for why the market is yet to fully take off, we believe that for online merchants based in the UK with connections on the continent there are exciting opportunities waiting to be taken.

Firstly, the countries mentioned have a significant and growing middle class who lack easy access to many products for which there would otherwise be demand. Finding out what these products are will require first-hand knowledge of the local market place but getting this right will give merchants a fantastic grounding for long term growth.

The infrastructure in many parts of African countries is still substandard which has left the bricks and mortar retail sector underdeveloped. Coupled with rapidly growing levels of mobile phone ownership and network accessibility, many markets seem in theory to be a great ecosystem for an ecommerce venture to thrive.

Drawbacks:     

For the majority of Africans, day to day shopping habits are very different to those in economies such as the UK and the USA. Because of this, the main advantages of online shopping in these markets (convenience, value and choice), can be rendered either irrelevant or they are already catered for in some way.

Most people shop for essentials in the informal economy which is far cheaper than any online store, and those that do shop online for larger purchases such as electronics are already well catered for in many segments by platforms like Amazon.com.

These are the issues to consider when selling a product to the existing online market in Africa and when looking towards long term growth the discussion comes back to the supporting infrastructure.

Most Africans do not own a debit card and many banks will still not process transactions on behalf of merchants’ operating from the continent, which is holding back the industry as a whole. On top of this, logistics in many areas are poor meaning that everyday products with a short lead time do not lend themselves to ecommerce at this stage.

Conclusion:

The ecommerce market in Africa is ultimately growing and the multi-million dollar investments in some of its better known ecommerce businesses by well respected investors are a testament to its potential.

Having said this, the shrewdest investors know that substantial returns are likely to be a long-term result and there are still uncontrollable environmental factors which limit potential growth.

As a company based offshore there is however the opportunity to establish a niche by understanding the tastes of the market you are targeting and offering new products to suit these.

Because the ecommerce landscape is less developed it means that there may be the opportunity to establish a first mover advantage when the same market in the UK is already saturated.

Just remember that although there is less online competition, because the current markets in African countries are also relatively small, the same fundamentals for ecommerce success still very much apply!