The e-commerce market in Africa
Africa is a growing market for e-commerce with more players entering the industry. According to a report by Statista, e-commerce in Africa was valued at $16.5 billion in 2017. Another report by the consulting firm McKinsey showed that this value could well go up to $75 billion by 2025.
When it comes to e-commerce, other markets like the US and Europe rank higher than African countries even though online shopping is spreading really fast in Africa. The rapid internet adoption rate through smartphones in recent times has also contributed immensely to the growth of the e-commerce market in Africa especially in countries such as South Africa, Nigeria, Egypt and Kenya.
E-commerce currently accounts for a small percentage share of total retail sales in Africa. Most of this growth comes from the increasing adoption of online shopping practices by consumers. Consumers shop online to save time, and for available varieties of products and services. According to a report, Africa's largest B2C E-Commerce markets include Nigeria and South Africa. In both countries, more than 50% of internet users shop online, whereby South Africa is significantly ahead of Nigeria in terms of internet penetration. South Africa has the highest internet penetration at 56 per cent, with Nigeria and Kenya at 46 per cent and 31 per cent respectively. Another regional leader is Egypt, where online retail sales register high growth rates of above 30% as of 2019.
Nigeria is Africa’s largest business-to-consumer e-commerce market in terms of both the number of shoppers and revenue but in reality, Africa is far from realizing its full potential in the e-commerce market. There are a couple of obstacles that seem to hinder the rapid progression of e-commerce in Africa namely:
- Access to Internet
Africa is home to 54 countries and as much as the internet penetration is growing rapidly, not every region has been covered yet. While efforts are being made to connect more Africans to broadband networks, internet services are still very expensive. This means that many people prefer buying their goods at physical stores than wasting data browsing e-commerce sites for their merchandise.
- Online payments
Another challenge is the issue of online payments. A large number of the African population is unbanked which means that not a lot of people are accessing e-commerce platforms and the others that access e-commerce platforms prefer cash on delivery because sometimes the online mode of payment might not be supported in their country.
Logistics is also another major challenge faced by the e-commerce market in Africa since e-commerce relies greatly on good infrastructure offered by postal services in countries for its last-mile delivery. The postal services in most African countries are extremely limited or non-existent, making e-commerce operations extremely difficult. This increases the cost of doing business because transportation costs are at least three times higher than they are in developed countries.
From access to the internet to payment methods and even logistics, these impediments can be found at the various stages of the shopping cycle. Experts believe that a number of problems need to be resolved before Africa can realize its full potential as an e-commerce ready market.
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