As competition in e-commerce in Africa continues to heat up, a number of trends have emerged as key drivers in what is fast becoming a crowded sector.
Though the e-commerce market in sub-Saharan Africa is relatively nascent, the rapid growth and potential of the sector has attracted local and international investors interested in gaining a first mover advantage in Africa’s consumer market estimated to be the fastest growing in the world.
What are some of the key industry trends currently driving e-commerce in Africa? We enumerate them below.
5 trends driving e-commerce in Africa
1. Cash on delivery
Cash on delivery has emerged as a leading payment method across multiple African markets to address the lack of trust for online payments and e-commerce still prevalent in many African countries. The method takes advantage of present day consumer habits where physical cash exchanges still dominates majority of transactions even as global financial services companies such as Visa and Mastercard work to increase the penetration of debit cards across multiple markets. Interestingly, Rocket Internet’s recent introduction into the African market, SafePay, an escrow service that releases payments on directive from the buyer after delivery might prove to be a respite. The escrow model has been adopted previously in other emerging markets, notably by e-commerce giant, Alibaba via its online payment escrow service Alipay to much success. Safepay’s entry is still nascent and restricted to Rocket Internet’s eBay clone, Kaymu, however, it will be interesting to see how consumers react to its relatively safer value proposition for online payments.
2. Proprietary logistics networks
Proprietary logistics networks continue to be a key feature rolled out by e-commerce players implemented to adapt to the lack of reliable transportation, incomplete address systems and delivery networks in most African countries. African e-commerce companies have had to develop their own in house logistics networks to handle the end to end delivery process for getting goods to customers in the absence of reliable postal systems. This poses a logistics and cost challenge for industry players and undoubtedly, a constraint on margins.
3. Mobile commerce
Mobile commerce continues to drive e-commerce access and interactions, highlighting the need to create mobile centric e-commerce solutions for African users. Mobile continues to be a product differentiator with players emphasizing strong mobile interfaces and user experiences driving visits and increased consumer interaction. Despite the rise of low cost Android devices by mobile device manufacturers such as Huawei, Nokia and Samsung feature phones remain the dominant mobile devices in sub-Saharan Africa’s largest Internet markets.
4. Long term warehousing
Long term warehousing is another key trend peculiar to the African e-commerce industry. Inventory management poses a challenge as import dependency of stock units necessitates long term warehousing of e-commerce third party goods. Overall, this has led to a hybrid e-commerce model that is supported by significant offline inventory stocking with a relatively long lifecycle. Industry players have as a result had to increase their warehouse capacity and have had to devise creative means of demand forecasting.
5. Social customer service
Social customer service has emerged to be a key differentiator for consumers with quality service serving as a key word of mouth referral influencer and an offline virality driver. The lack of trust of eCommerce solutions in general makes customer service a powerful longterm tool for driving consumer awareness and gradually increasing trust for and reliance on e-commerce goods. Social media chatter has also become an important arena for gauging user sentiments as well as for dispute resolution.
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