Business
African retail finds growing e-commerce outlet online as middle class expands
Young Ghanaian entrepreneur Nana Tamakloe could hardly have a simpler business plan. When people order clothes from his website, he buys the items from stalls and shops in Accra, ships them with DHL and gets paid online.
His suppliers love him as a regular customer and don’t care that he doubles their prices to cover his costs.
“Most of the clothes sellers and tailors do not have a way to reach clients abroad, so I was like: ‘Let’s create an e-commerce platform,'” said Tamakloe, whose www.fashionghana.com website serves customers in the West and some in Africa.
Tamakloe’s business is small but he is tapping into a market manufacturers and internet companies say will be big: online retail in Africa.
The backdrop is simple. The growth of Africa’s middle class has created demand for products that conventional retail struggles to satisfy due to a shortage of malls and grinding traffic in many cities that deters shoppers.
At the same time, giants such as Amazon and Chinese e-commerce firm Alibaba are out of reach for most consumers. Step forward companies who tailor their service to African markets.
The sector is still in its infancy. The internet’s contribution to Africa’s gross domestic product (GDP) stood at 1.1 percent in 2013, much lower than other emerging markets. This is estimated to rise to 10 percent, or US$300 billion, by 2025, according to a report by consultants McKinsey’s & Company.
Last year, hedge fund Tiger Global invested US$100 million in South African online e-commerce shopping company Takealot. European firm, Rocket Internet invested 120 million euro (US$136 million) in Nigeria-based online retailer Jumia in November.
Rocket, emerging markets telecoms group Millicom and MTN South Africa have partnered to create Africa Internet Group (AIG), an e-commerce company that operates in 27 countries and is working with firms that include Jumia and Lamudi, a to trade in the growing real estate market on the continent.
The newness of the sector creates a scramble for dominance and consumer choice. If a customer wants to trade second hand goods then OLX, owned by South African media and technology giant Naspers, provides an service online.
If it is Western goods, then Mall of Africa facilitates that online in Nigeria as does e-commerce store Konga.
Inevitably, the sector is growing quickest in sub-Saharan Africa’s sturdier economies and fastest of all in South Africa, with its more developed e-commerce sector.
But the potential in countries such as Kenya, Uganda, Nigeria, Ghana, Ivory Coast and Senegal is such that online retailers say their main aim is not to beat their competitors so much as to grab a bigger slice of the overall retail market.
“Becoming number one is not difficult. The real objective is to be the leader across online and offline,” said Jeremy Hodara, co-chief executive of Africa Internet Group.
Expansion requires attracting new customers, allaying fears of fraud, building trading platforms and mastering delivery networks, all on a continent where few use credit cards. African e-commerce firms take cash payments on receipt of goods to overcome this hurdle.
It also means persuading vendors that online sales can boost trade.
Source: Reuters