The growth of domestic eCommerce and the emerging middle class pave the way for international retailers in Africa
Africa boasts over 1 billion potential customers, coupled with a growing middle class, African retail investors are starting to take note. There is a slow steady shift towards online trade, with several retail start-ups successfully entering the market.
Africa’s online marketplace, Jumia, is leading the charge, receiving investment from Goldman Sachs, as well as prominent French, South African, and German companies.
In Nigeria, Jumia makes thousands of daily deliveries. In 2015, the first nine months generated €206 million. A year on year increase of 265%. It is one of the largest e-commerce enterprises operating in Africa, all of which are seeking to tap into the continent’s growing consumer market.
McKinsey Global Institute projected that eCommerce will be worth $75 billion in Africa’s leading economies by 2025.
There are challenges ahead for African eCommerce and cross border ecommerce faces barriers of poor infrastructure, underdeveloped logistics and difficulties surrounding international bank transactions. Most African countries don’t have formal addresses and this can result in difficulty locating customers. Low credit card penetration in a number of regions and customer’s anxiety over fraud, mean that cash on delivery is preferred in many African countries.
Many of the challenges that International retailers face in Africa, are similar to those which have already been overcome in many Middle Eastern markets. Low credit card penetration and the preference of cash on delivery, have been successfully navigated by International retailers in the Middle East. The growth of domestic eCommerce and the emerging middle class pave the way, with Africa representing a new challenge, but this time with the Middle East offering a potential road map.
Source: The Guardian