There’s an enormous opportunity brewing in the world’s second-largest and second most populous continent that outweighs the risks of a region pocked by violence and instability. With the International Monetary Fund (IMF) ranking Ethiopia, Cote d’Ivoire and the Democratic Republic of Congo as some of the world’s fastest growing economies, Africa is demonstrating it is ripe for an unprecedented economic opportunity that, if tapped smartly, could lead to billions of dollars in online sales for major global brands with a strong presence in other areas of the world.
Africa has many unique factors that will contribute to the huge consumer spending opportunity that smart e-commerce companies can take advantage of:
- Big in Population: The continent’s population numbers are enough to make any retailer’s head spin with anticipation. The United Nations predicts Africa’s total population of 1.2 billion is expected to rise to 2.5 billion by 2050, which means one in four people on earth will be African. The continent is also the only region in the world expected to increase in population after 2050, with an increase to 4.4 billion people by 2100. Combining this population growth with the expected rise in the African middle class and increasing consumer activity creates a compelling investment opportunity for global retailers.
- Urbanization: Africa is the fastest urbanizing continent, with an average urban growth of 3.4 percent. By 2050, 1.2 billion people—60 percent of all Africans—are projected to live in cities according to presenters at the Understanding Risk & Finance Conference. With urban growth comes improved living standards and increased spending power. Consumer spending in Africa is estimated to exceed $1 trillion annually by 2020 reports Forbes. The 18 largest cities in Africa will have a combined spending power of $1.3 trillion by 2030, giving retailers an enormous opportunity to meet the demands of these newly-empowered shoppers.
- Lack of retail outlets: Thriving city populations are already outpacing Africa’s traditional marketplaces, and many African urban centers lack enough brick-and-mortar retail locations. With the lack of retail infrastructure, e-commerce becomes a more affordable, efficient and easier option for African consumers. McKinsey and Company predicts that some $75 billion in e-commerce revenue in Africa will be generated by 2025, about 10 percent of retail sales of the continent’s largest economies and 40 percent annual growth over the next 10 years.
- Mobile capabilities: Africa leapfrogged the world by becoming a mobile-first, mobile-only and mobile-web continent. While less than one in three people have a proper drainage system, and only 63 percent have access to piped water, a staggering 93 percent have cell phone service according to the Afrobarometer. The explosion of mobile phone networks has transformed data and communications on the continent, allowing Africans to skip the landline stage and jump right into the mobile age. Most Africans experience the Internet for the first time on a cell phone, and more and more on a smartphone opening the way for online retailing.
- Drawn to the global brands: With increased buying power comes brand preference as African consumers shift from unbranded products to branded; and from economy to premium brands. While some consumers will continue to support local brands for products such as food, beverages, and some household items, many Africans are attracted to the quality, prestige and strong social cachet that global brands offer, particularly in clothing, durables, and electronics reports Nielsen.
- Prime age online shoppers: Africa’s young population will be a huge pool of untapped e-commerce riches. The IMF predicts 100 million people in the region will reach the working age of 15 to 64 by 2035, nearly double the number of the rest of the world. This scenario presents a rare opportunity to help transform the online shopping experience of an entire generation of Africans.
Making E-Sales in Africa
Around the world, e-commerce always comes with some challenges and inefficiencies, and Africa has many. While some e-tailers focused on Africa have shuttered their businesses almost as fast as they’ve been opening, retailers determined to overcome the e-commerce challenges are adapting the online experience for the African consumer and implementing some clear, long-term plans.
- Overcoming Distrust: Like their peers in other countries, wealthy Africans are concerned with scams, which prevent many from disclosing financial information and buying online. Some online sites offer cash-on-delivery (COD) to overcome these concerns, but COD can cause massive problems for retailers including theft, the high cost of returns, and couriers returning cash late. One emerging solution is using a trusted third party between buyer and seller to handle the money. E-tailers have to play their part to keep online transactions safe by employing products and services such as Trustwave and other data protection providers.
- Helping Literacy: Shopping online requires some literacy, but illiteracy remains high in Africa, with some countries having literacy rates of less than 30 percent. Opportunities to tackle this include building educational apps supported by e-commerce advertising or rebuilding the e-commerce experience with less text and more images. Chat-based selling can switch to call-based selling, and smartphone-based virtual reality is coming online soon, which could lead to fewer literacy requirements for shopping online.
- Better Delivery: While many postal services across Africa leave a lot to be desired when it comes to service level expectations, e-tailers can create their own, more reliable delivery options. E-tailers can deliver through crowd shipping, drone delivery networks, and multiple pick-up locations. Companies must set up a decent delivery infrastructure or partner with a company that has one in place already
- Solid Return Policies: Like many global online consumers, Africans need to touch and try on items before purchasing them. The underlying concern is that returns will not be accepted after the transaction. Any self-respecting e-retailer should have the option for efficient exchanges and returns in the same manner that brick-and-mortar retail stores do, even offering free trials and top-notch return policies.
- Cloud-Based Technology: To deliver a positive customer experience and the expected convenience of online shopping, retailers must remove obstacles to embracing cross-border commerce. These issues can include an ever-changing trade environment; managing varying, country-specific tariffs; and accurately classifying products based on conflicting country requirements. Retailers must maintain timely access to global trade information and master product classification, with the ability to comprehensively calculate landed costs at the time of order entry, to avoid cost surprises and unnecessary product delays. By leveraging a cloud-based global trade management solution, e-tailers can allow for ready, easy access to information worldwide, and create a frictionless e-commerce experience.
It is easy to see how Africa is poised to become the next big e-commerce marketplace and the significant profitability potential of the continent’s emerging consumers. Global retailers should be gearing up for this region with carefully developed strategies, smart deployment plans, and implementing world-class technology to seize this financial opportunity from Africa joining the other mega-markets of the world.
Amber Road provides global trade management software.
Favorite