Challenges and Considerations in Africa’s E-Commerce Market

Oct 29, 2021

In recent years, more investors and business leaders have turned their attention to the African market. The region is home to 1.34 billion people, nearly one-fifth of the world’s population. 

The e-commerce market in Africa had tremendous growth over the pandemic, reaching US$27.97 billion in 2020. Last year we even saw how the Sub-Saharan Africa market dominated as the world’s fastest-growing region in e-commerce logistics.

However, as with all markets, there are deterrents when it comes to entering a new market. In our latest Fireside Chat, we spoke with Senior Partnerships Lead from what3wordsPierre-Guy, to understand what are the five things to consider when entering Africa’s e-commerce market. Let’s take a look!

#1 Hyper-localization Needs

Similar to Europe and Asia, Africa is a fragmented market with a huge cultural, political, and economic diversity. One notable consideration for e-commerce businesses entering the African market would be market localization. For instance, with the number of languages in Africa, e-commerce businesses looking to expand to any of the cities in this continent will need to have a website in the local language to ensure customers are able to understand their product offerings.

To ensure products can be delivered quickly, it is also important for e-commerce companies to build relationships with local logistics partners in Africa to have more regional or local distribution hubs. 

#2 Incomplete Delivery Addresses 

Whilst this may not be a challenge to other countries, many retailers and e-commerce businesses in Africa find it difficult to deliver products efficiently to customers. Without clear or complete delivery addresses,  delivery companies in Africa today still rely on landmarks provided by customers to fulfill orders. 

This leads to a huge loss of time since couriers have to spend extra time getting the right location from customers. This problem persists even in gated residential areas in Africa.

What3words, NIgeria

(Image Source: what3words)

Businesses such as what3words, therefore, came up with a solution to solve this problem. The company divides the world into 3-meter squares and names each square with a unique combination of three words. This makes it easier for customers to specify their exact location, which helps e-commerce and logistics companies to deliver more efficiently.

#3 Various Payment Methods

Every country in Africa has multiple forms of payment methods, ranging from mobile payments and transactions based on a crypto heatmap, to credit card payments. To ensure that consumers have a seamless purchasing experience, it is thus key for businesses to first understand the payment landscape of each city and how to incorporate these local payment methods in their e-commerce storefronts.

Pierre-Guy shared how he has seen QR code payment methods being used predominantly in one market and cash-on-delivery in another. Ensuring that local payment methods are offered by the merchant is very important in the African market, which would otherwise be a huge roadblock to doing e-commerce business in Africa.

#4 Limited Logistics Infrastructure

A large portion of the region does not have a robust logistics infrastructure in place to do quick deliveries. Logistics companies that offer same or next-day deliveries are extremely rare and hard to find. This poses an obstacle for e-commerce businesses wanting to enter the African market. Amazon, which has a strong logistics infrastructure in other markets, has not even entered this market yet.

In some markets, e-commerce businesses would need to build their own logistics ecosystem from scratch. Leading e-commerce marketplace in Africa, Jumia did just that. building a distribution network of its own and creating a solid logistical infrastructure. Today, Jumia owns a larger fleet of delivery trucks than DHL and distributes goods in eleven countries.  By working with a collection of very small companies, Jumia built their own logistics distribution network and created a logistics infrastructure that worked for them. Today, the company is said to own a fleet of delivery trucks larger than DHL and delivers packages across 11 countries.

#5 Embracing Failure

Like all things in life, success does not come without failure. We should learn how to embrace our past mistakes and failures, and use them as a springboard for future improvements. As customer behavior and market conditions continue to change, e-commerce businesses will need to stay on top of the latest trends and be flexible enough to quickly adapt to these changes in order to stay ahead of the curve.

With persistence and through continuous experimentation and learning, businesses will be able to find their own ‘secret sauce’ to succeed in one of the fastest-growing markets in the world.

Keeping up with the latest e-commerce logistics trends

Each new market comes with its own challenges. Market research is therefore extremely critical for businesses planning to enter a new market. As the market evolves, businesses should also adapt accordingly to ensure that they follow the latest trends

For more exclusive reports, insights, and interviews on the latest updates in e-commerce and logistics, follow us on LinkedIn or join our community as a member.

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