The evolution of commerce in Africa has come a long way from the era of trade by barter, which was simple but had numerous shortcomings, such as the indivisibility of goods and double coincidence of wants. The introduction of money took care of these shortcomings but also came with its own challenges as transactions still happened in the physical world with the added risks of loss and theft.
Running a business is difficult, and doing business in Africa is even more difficult, so the era also saw a plethora of failed e-commerce attempts,at the time e-commerce was introduced into the continent.
Many were convinced that e-commerce couldn't stand a chance in most African countries as most of them were still underdeveloped.
They had to deal with the reality of a small addressable middle-class market, a lack of functional addressing systems, poor road networks, a general preference for cash payments, the lack of payment rails and logistics networks, worries about fake products, and escalating security concerns, an uphill battle African e-commerce companies are still fighting to this day.
This first phase of e-commerce start-ups in Africa caused many to question the viability of e-commerce in Africa, but improving market conditions, the necessity for e-commerce, and the huge potential market size made up of a large population of people under forty years of age, led many to keep trying with hopes of attaining some level of success.
When Amazon came in 2017, it seemed like a validation of sorts. The e-commerce giant expanded into the Middle East and North Africa (MENA) region by acquiring Souq, a leading MENA e-commerce company, for $580 million.
Ever since this happened, Amazon has increased its presence in Africa with the commencement of its sub-Saharan Africa fulfillment center being built in Cape Town, South Africa, and a possibility of more acquisitions into black Africa with a likely expansion into Nigeria by 2023, being the largest market in Africa in the immediate future.
The next noteworthy activity came two years later, in 2019 when Jumia was listed on the New York Stock Exchange. This move was seen as validation for African companies and the e-commerce sector. This validation is also evident in the growth of e-commerce users on the continent.
More recently, we’ve seen a third wave of e-commerce startups that are digitizing offline commerce for restaurants and mom-and-pop shops, Students dropshipping, by providing them with tools to enable them to come online and do more. Startups such as Orda, Kippa, and Sabi are providing e-commerce enablement tools.
TOP THREE FACTORS FOR THE GROWTH OF E-COMMERCE IN AFRICA
The growth of e-commerce users in Africa over the years is due to a number of factors.
1.The increase in payment services 2.Penetration of the internet in the continent 3.The proliferation of cheap smartphones.
There are now more than 400 million internet users in Africa, compared to over 100 million users at the end of 2010. This makes Africa the second largest internet user population on the planet, just after China.
The increase in internet users, which has largely been driven by a rise in smartphone penetration and a reduction in data plans by telcos and internet service providers, implies that more members of Africa’s middle class can access e-commerce platforms.
4.INCREASED SUCCESSFUL ONLINE PURCHASING EXPERIENCE
Over the years, there has been a surge in customer confidence in e-commerce due to an increasingly successful online purchasing experience, despite a few cases of fraud. The availability of more online payment options with fewer failed transactions has also contributed to the increase in consumer trust.
Logistics players such as Gokada, with more than 2,000 bikes being used as of 2020; Safeboda, with over 10,000 riders in Ibadan; as well as the ride-hailing giants Uber and Bolt, with a network of hundreds of thousands of drivers in Africa, are making it easier for business-to-consumer (B2C) e-commerce players to conduct last-mile deliveries. It’s worth noting the contributions of other logistics players such as Tibikes Express, Tollgate Logistics, GiG, ACE (Perseus Limited), Skye net, Speedaf, and Fez.
Business-to-business (B2B) players such as Trade Depot, which serve 100,000 merchants across Africa, and Wasoko, which has delivered 2.5 million orders to more than 50,000 active retail customers (mostly informal retailers) in its network since 2016, are attacking the logistics challenge head-on.
5.DISEASES
Interestingly,diseases have also been pivotal to e-commerce’s uptake in the continent.
Over the past decade, outbreaks of diseases have necessitated an improvement in hygiene, as well as how important online shopping is. Jumia experienced massive growth as a result of the Ebola outbreak in 2014; the same happened in 2020 due to the coronavirus pandemic. This was primarily due to the demand for hygiene products and groceries, as well as a need to avoid physical clusters.(Social distancing).
In April 2020, during the global lockdowns, Flutterwave launched the Flutterwave store, its own e-commerce solution for African businesses. Six months later, Interswitch’s Quickteller was next with a Quickteller Storefront digital shop and payment solution for merchants. By December of that year, Paystack finally joined with Paystack Storefront, its own e-commerce solution that also allowed merchants to own digital stores and accept payments.
Granted, sudden spikes cannot be interpreted as a recipe for long-term sustainability, but they’re a pointer to what’s possible, and a resurgence of e-commerce in Africa is imminent.
Africa’s growing middle-class population — 313 million people (approximately 34% of the continent’s population) — and the steady growth of private consumption (3.7% per year) are making e-commerce appealing.
6.ADVANCEMENT IN TECHNOLOGY
The advancement of technology, with huge access to funding by startups on the continent, and economies of scale enjoyed by manufacturers which have led to the reduction in the price of items such as smartphones, will continue to make access to e-commerce a game changer.
As of the end of 2022, the e-commerce share of global retail sales is expected to be 21%, growing to 25% by 2025. For Africa, the e-commerce industry is estimated to grow at a compound annual growth rate of 24.7% between 2017 and 2024 according to Statista. The e-commerce users in Africa are expected to grow to 338 million users in 2022 and 519 million users by 2025.
This rise in e-commerce sales and users will only continue as e-commerce is the key growth engine for retail.
Finally,E-commerce evolutionalized,from the era where majority of the African population saw it as a medium for fraudsters to extort individuals,to the era where very few individual were willing to partake in it's process,then the this era where almost all purchases could be made online .
E-commerce is obviously breaking new grounds in Africa as the continent is speedily growing in it's technological advancement and other factors which have already been earlier outlined.
