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Facts / September 10, 2020

online shopping africa

How e-commerce supports African business growth

There are many opportunities in Africa’s e-commerce industry that will boost small businesses and assist the larger businesses to enter an energized consumer market. Africa has over 500 million internet users and online shopping is increasing due to more e-payment innovations and improvement in technical security.

Demand for online shopping in Africa

The number of people in Africa that are shopping online has risen by 18% annually since 2014 according to a report done by the United Nations Conference on Trade and Development (UNCTAD). However, by 2025 online shopping could account for 10% of retail sales. As more people connect to the internet to do their shopping, the demand for smartphone devices also increases. Connecting to the internet using a smartphone requires less technical parts than a computer. For this reason, consumers have an easier and more efficient way to access goods and services.

The demand for online shopping and improvement in Africa’s connectivity has created an opportunity for the development of e-commerce platforms within the continent itself, supported by foreign investment. South Africa’s online shopping company Takealot received an investment of US$ 100 million in 2015 from American hedge fund Tiger Global Management.

Insight into Africa’s consumers

According to an interview with Sacha Poignonnec, cofounder and co-CEO of Jumia “Consumers in Africa want the same thing as consumers everywhere else: they want good products at a good price, good quality… And for us, consumers want to save time and save money.” The majority of e-commerce in Africa comes from Nigeria, South Africa, and Kenya; with Nigeria having the largest e-commerce consumer market.

Africa’s consumers do not yet trust the internet for making payments and prefer to pay cash upon delivery to avoid being scammed. This has been a challenge for online shopping platforms that require payment at the time of order. This created an opportunity for companies like Direct Pay Online to create a solution for a secure online payment processor to assist clients and merchants.

Africa’s opportunities for logistics sector

In Nigeria, the addressing system only allows 20% of the population to get home delivery. This is an opportunity for local businesses in the retail, logistics, warehousing, and supply chain sectors, to partner with e-commerce marketplaces to get the product to the consumer in their towns or districts.

AIG Express which was founded by Jumia and Kaymu, another top e-commerce platform in Africa, to fulfill the need for a delivery platform and create up to 100,000 jobs. This new venture aims to work with local logistics entrepreneurs by implementing technology and training to handle e-commerce logistics.

Online shopping approaches for small businesses in Africa

Small and medium enterprises constitute 90% of businesses in most African countries, and encourage entrepreneurial and business skills among communities and drive economic growth and lessen poverty.

The development of proper digital innovation ecosystems is needed so that these SM businesses can have the knowledge and tools to benefit from e-commerce trading. Elements that are needed for a digital innovation ecosystem to be successful are:

  1. Facilitation platforms
  2. Free resources to support the development and commercialization of goods and services.
  3. Research and development access from members in the ecosystem
  4. Gaining trust by equipping enterprises’ employees with the knowledge, skills, and information to be able to work with other players in the ecosystem.

There are already some facilitation platforms in Africa doing this such as Kenya’s i-hub, Uganda’s hive-colab, and Nigeria’s AfriLab.

With more investment in developing the digital ecosystem and logistics, small and medium businesses can benefit from Africa’s e-commerce boom.

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