E-commerce in Africa is growing rapidly, and could offer exciting opportunities for UK brands. Although the continent still faces setbacks in the digital world, more companies are paying attention and are looking to tap into a new group of consumers.

A Growing Market

Since 2014, the number of online shoppers in Africa has surged annually by 18%. Statista found that the total value of the continent’s e-commerce market reached $16.5 billion in 2017 and was expected to reach $29 billion by 2022. Meanwhile, research from McKinsey projected that by 2025, consumer spending in Africa would reach $2.1 trillion. Those consumers are coming online in greater numbers as well. The percentage of Africans that have access to the internet has risen rapidly from just 5.5% in 2005 to 24.4% in 2018.

The most popular e-commerce marketplaces in Africa are Jumia, Konga and Kilimall, which have an average of over 34 million monthly visitors to their sites, with eBay and Alibaba offering shipping options to Africa as well. Amazon offers no e-commerce marketplace in Africa at present.

Payment Options In Africa

UK and US brands can sell directly to African consumers using DHL’s Africa eShop, which was set up in 2018. DHL works with the startup MallforAfrica.com’s and their white label fulfilment service Link Commerce. The e shop allows users from 35 African countries to buy directly from over 200 US and UK sellers. DHL’s Africa eShop uses local fintech options such as Nigeria’s Paga or Kenya’s M-Pesa to process payments.

Meanwhile, Jumia and Konga have set up their own capabilities, JumiaPay and KongaPay. The services allow users with a linked bank account and phone number to receive a code which works as a one-click payment. Payment services such as WeChat and Alipay are also available in East Africa and work in partnership with the regional services company Equity Bank.

Challenges And Opportunities For UK Brands

Although more fintech companies are coming up with solutions for e-commerce payment methods, cash on delivery is still a commonly used payment method for online sellers. Furthermore, only 20% of the population in Africa has a bank account. Payment solutions powered by fintech companies like Paga and M-Pesa can help to address payment challenges, but UK brands may find that the quality of payment solutions differ from country to country, making it harder to come up with a large-scale strategy that targets multiple countries at once.

Using a third-party platform such as DHL’s Africa eShop that simplifies a UK brand’s e-commerce presence could be a solution, as DHL partners with fintech companies on the brand’s behalf. This allows a brand to sell to multiple countries without having to partner with payment providers individually within each country. Large UK brands such as River Island, Boohoo and Selfridges are already using the platform to sell to African consumers.

Another issue that UK brands could face is logistics. Sacha Poignonnec, Co-Founder and Co-CEO of African e-commerce platform Jumia, explained how delivering goods on this continent is very different to in Europe or America. “In Africa, there’s no address system in most of the cities. For someone to find a consumer, you need to have a local partner who knows where the consumer is, based on very subjective information… for example… ‘I live in the third street by the church with the blue door,’ that’s the address,” he said. “..If your partner has the right local knowledge, they can find these consumers because they understand that.”

Jumia has an in-depth logistical network across 11 African countries, having processed over 20 million packages in 2019. They have shown that a strong logistical network can work well for e-commerce retailers in Africa and have recently announced that they are opening up to third-party businesses. Partnering with experienced logistics partners like Jumia could be a good way for UK brands to tap into a market that can be difficult to navigate from a delivery point of view.

A Targeted Strategy

One major consideration is that Africa isn’t consistent when it comes to access to the internet and e-commerce. There are large disparities between African countries regarding quality of internet access, meaning that it may be harder for brands to target large swathes of the continent with one strategy, as they might do so in Europe or the Americas.

Considering that in 2017, a report found that Nigeria, South Africa and Kenya account for more than half of the online shoppers in Africa, with Nigeria being the largest in both number of shoppers and revenue, brands may find more success focusing on those countries to begin with. Those three countries alone account for over 300 million African consumers, so specifically targeting them could prove to be an excellent and profitable route into the wider African market.

While many challenges certainly exist, both local and international companies are coming up with innovative technologies to help brands work their way into this growing consumer group. Establishing local logistical and payment partnerships while developing a robust strategy for a few countries may well be the key to unlocking a new segment of e-commerce users.

Sources:

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https://www.theasianbanker.com/updates-and-articles/nigeria,-south-africa-and-kenya-dominate-the-e-commerce-industry-in-sub-saharan-africa