Africa offers enormous growth potential for e-retailers

With Africa regarded as the last frontier of economic growth, the continent offers enormous growth potential for e-retailers given that online shopping is in its infancy in the region, according to a latest DHL ‘Shop the World’ report.

Sumesh Rahavendra, head of marketing, DHL Express sub-Saharan Africa (SSA), revealed that although global e-retailer Amazon celebrated its 20th anniversary in July 2014 in the business of e-Commerce, e-Commerce companies in Africa are beginning to mark and/or accelerate their presence in the marketplace.

Jumia, an online retail firm founded only two years ago, is quickly gaining market share within the country which reiterates the region’s potential. Interestingly, Nigeria are riding on the back of expanding social media platform to make inroads into the economy, with the value estimated to reach $3.3bn in the next two years, BusinessDay investigations show.

Industry watchers say the innovative application of social media platforms notably Facebook and Twitter by online retailers such as Konga, Jumia, Adibba, OLX, Gloo and Gidimall to drive customer awareness, interaction and marketing campaigns is a fundamental factor responsible for their massive success.

Nigeria’s online shopping sector grew from N49.9 to N62.4bn between 2010 and 2011, and from N62.4 to N78bn between 2011 and 2012 representing a 25 percent increase in each period, according to Phillips Consulting.

Nigeria is ranked tops in terms of social media usage with over 11 million users. A new report by Portland Communications, a Kenya-based public relations agency, says Nigerians are the third most-active Twitter users on the continent. These developments have led to an increase in e-commerce companies because consumers are beginning to look for shopping channels to shop for daily consumables.

A McKinsey & Company report reveal that e-Commerce could account for 10 percent of retail sales in the African continent’s largest economies by 2025. In comparison, online retail in the United States of America already accounts for around 9 percent of total retail sales.

“Globally, it took over 2,000 years for a formal monetary system to evolve and over 600 years for a formal banking system to be implemented. It’s taken over 50 years for credit and debit cards to be introduced and still not every person has a bank account. With all these milestones that have taken place in the evolution of commerce, it goes to show that how we shop (e-commerce), is still in its infancy,” Rahavendra explained.

The DHL ‘Shop the World’ report revealed that Asia Pacific took centre stage in the global e-Commerce market, which is largely attributed to increased access to internet. Though technology on the African continent is a hindrance in terms of connectivity, there is a rising trend in retailers growing significantly due to advances in this area.

According to figures by the International Communications Union, 16 percent of the African population have internet access, up from 10 percent in 2010.

The 2014 Mobile Media Consumption report(4) by InMobi, which includes data from 14,000 users across 14 countries, including Nigeria, Kenya and South Africa, predicted that 83 percent of consumers plan to conduct mobile commerce in the next 12 months, up 15 percent from the current figure.

“As technology continues to evolve in the respective African countries, as will the levels of online shopping. It is of our opinion that many African businesses will start to skip the traditional ‘bricks and mortar’ formal retail environment, and instead move straight into online shopping space due to the rise in mobile and internet services within Africa,” Rahavendra added.