Factors leading to rapid growth of African eCommerce

By Josephine Wawira

eCommerce grown rapidly accross Africa

eCommerce 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 are 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 of 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 over 250,000 gross orders.

A bigger impact was experienced this year – with mind-blowing deals already running since the 14th of November – with the actual Black Friday taking place on 25th of November. That said, various factors have contributed to the rise and success of eCommerce in Africa, as discussed below.

Increasing mobile penetration

According to the statistics released by GSMA Intelligence – the definitive source of mobile operator data, 46 percent of the population in Africa subscribed to mobile services at the end of 2015 – an equivalent of more than 500 million mobile subscribers.
In East Africa’s largest economy, Kenya, mobile penetration stood at 88.1 percent with 37.8 million subscribers in 2015/2016. 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.

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 5 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 percent of mobile subscribers in Africa still operate feature phones according to Pew Research Center. Therefore, there is 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) millennial Africans who are extremely ‘digitally smart’. They seek relevant online content that will engage their energetic and curious minds. They are also after memorable online experiences, be it while transacting an online purchase, a hotel booking, ordering food online etc. Online service providers are therefore propelled to offer 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 US$14.27 billion by 2020.
Mobile payments are highly preferred due to their convenience. For instance, approximately 60 percent of customers on Jumia Travel pay for their bookings via mobile money, including M-Pesa in Kenya and its equivalent in Tanzania.

Increased Consumer Spending

A McKinsey Global Institute analysis projects that by 2025, Africa’s household consumer spending will reach US$2.1 trillion – representing an increase of 45 percent 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 will contribute 67 percent (US$433 billion) of Africa’s total growth in consumer spending between 2015 and 2025 which is projected at US$645 billion in total.

Investment

Upon identifying Africa’s potential in eCommerce development, both angel and corporate investors 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 Nigerian eCommerce giant 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.

Josephine Wawira is a Consultant in Communications an Public Relations with Jumia Travel. The original version of this article was published at the Weekend Post.