Key Contributors To The Rise Of eCommerce In Africa
E-Commerce has rapidly grown in the recent years across Africa and the world at large.
This is conceivably because of the plentiful positive outcomes it has had on various industries including travel, tourism, and hospitality sectors, with a ripple effect on entire economies especially in developing countries. These include but not limited to increased revenue returns as businesses diversify their clientele reach, as well as efficient and faster transactions both online and via mobile money solutions.
For instance, the popularity of the famed Black Friday Sales in Africa that take place on every 25th November on various platforms such as Jumia Travel, is in itself a success story on eCommerce. Statistics by the leading online hotel booking company show that in 2015, it registered record performance on Black Friday having attracted more than 5 million visitors in Africa with a record of 250 000+ gross orders. Bigger impact is expected this year, with mind-blowing deals already running since 14th November, with the actual Black Friday taking place on 25th November, 2016. That said, various factors have contributed to the rise and success of eCommerce in Africa, as discussed below.
Increasing mobile penetration
Statistics by GSMA Intelligence, the definitive source of mobile operator data, indicate that 46% of the population in Africa subscribed to mobile services at the end of 2015, which is equivalent to more than half a billion people. In Kenya alone, mobile penetration stood at 88.1% with 37.8million subscribers in 2015/2016, according to CAK. The adoption of mobile and smart devices has largely contributed to the growth of ecommerce due to the easy availability and accessibility of real-time information on the go.
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Better connectivity/Internet growth
GSMA Intelligence also reports rapid growth in mobile internet adoption in Africa with the number of mobile internet subscribers having tripled over the last five years. By the end of 2015, 300 million mobile internet subscribers were registered, and an additional 250 million are expected by 2020.
The implication of this is that more people have access to more online services and products, which in turn boost eCommerce. However, note that about 65% of mobile subscribers in Africa still operate feature phones according to Pew Research Center. Therefore, there’s need to develop ways to diversify operations to both online and offline processes, thus fully tapping into the market.
A digital savvy population
There is a growing population of DIY (Do It Yourself) millennials who are extremely ‘digitally’ smart. They seek relevant online content that will engage their energetic and curious mind. They are also after memorable online experiences, be it while doing an online purchase, a hotel booking, ordering food online etc. Online service providers are therefore propelled to give nothing but the best, as well as offer personal experiences to retain customers and stay competitive.
Mobile Money Solutions
Whether sending money to family or friends, booking hotels online or buying goods online, mobile payments which are done via mobile devices provide a convenient and efficient process for users. In Africa, the mobile money market is predicted to be worth $14.27 Billion by 2020. Mobile payment is highly preferred due to its convenient. For instance, approximately 60% of customers on Jumia Travel pay for their bookings via mobile money, including Mpesa in Kenya and Tigo Pesa in Tanzania.
Increased Consumer Spending
A McKinsey Global Institute analysis projects that by 2025, Africa’s household consumer spending will reach US$2.1Trillion, representing an increase of 45% from 2015. This presents promising business opportunities in a wide range of consumer-facing industries from entities offering healthcare to housing and leisure (travel). Projections show that Sub Saharan Africa (SSA) will contribute 67% (US$ 433B) of Africa’s total growth in consumer spending between 2015 and 2025 which is projected at US$ 645B in total.
Foreign Investment
Upon identifying Africa’s potential in ecommerce development, both angel investors and companies are playing an important role by investing in ecommerce businesses in the continent. Driven by the amazing innovative talents, tech startups are on the rise, and require constant mentorship and funding. For instance, Millicom, MTN, AXA, and Orange have equity stakes in Jumia, the parent company of some of Africa’s leading e-commerce platforms, including Jumia Travel, Jumia Mall and Market, Jumia House and Jumia Food.