Fast-forward a decade to the year 2025. True to the UN’s 2013 forecast, Africans now make up more than half of the world’s 8.1 billion population – and one in every three births (and almost one in every three children under the age of 18) are African. While South Africans quietly mark the country’s fourth decade of democracy, young people across the continent are wondering what happened to the Malabo Declaration, signed all those years ago in 2014, when African leaders vowed to end hunger and halve poverty by 2025.

While this is happening, Africa’s economists are tallying up the figures. E-commerce, which seemed to face insurmountable obstacles in 2015, now accounts for 10% of retail sales in the continent’s largest economies.

In 2025, annual online sales and advertising revenue make up a massive $75 billion. Buoyed by Africa’s mobile internet revolution, the whole retail sector has changed. Cost savings, strengthened supply chains and digitised payment collection mean that tech-related productivity gains in the retail sector are worth as much as $23 billion a year.

That may all sound like science fiction, but it’s the picture painted by McKinsey & Company in its report titled Lions Go Digital: The Internet’s Transformative Potential in Africa. It predicts that the portion of GDP derived from online commerce in Africa could increase between 5% to 6% by 2025 – putting it on par with leading economies such as Sweden, Taiwan and the UK. Could this all really happen?

Rewind to the present day. In May 2014, Cape Town-based online retailer Takealot.com said that it had raised more than $100 million in investment to fund its continued expansion into sub-Saharan Africa. ‘We have tremendous potential in a large, sustainable market and we are excited to keep investing for the long term,’ said the CEO Kim Reid. In October 2014, the online retailer announced plans to merge its operations with Naspers-owned e-commerce giants, Kalahari.com, forming what promises to be a formidable partnership.

That same month, Nigerian e-commerce site Gloo.ng revealed that it expected its revenue to reach $1 million by the end of the year – a figure that represented a massive 97% growth year-on-year. Not bad at all for a start-up that still only covers about 50% of Lagos.

E-commerce is growing rapidly across Africa. So what’s standing between the continent and its $75 billion future? You’d get a pretty sharp answer if you asked anyone who tried buying online during the recent South African Post Office strike.

Kalahari.com posted a warning on its home page, delivering one of the understatements of the year: ‘We’ve been informed that there could be some delays on post office deliveries at the moment.’ Piles and piles of undelivered orders told the rest of the story. It illustrated, in the most dramatic way, what PayGate’s GM of business development, Brendan Williamson, has been saying all along.

While most of the discussion about the relatively slow growth of e-commerce in SA has focused on consumers in the past, Williamson argues that the biggest problems may be on the supply side. ‘We hear the same old arguments all the time.

‘Consumers take a long time to feel comfortable about shopping online. South Africans like to touch and feel before buying, and so on. But instead of focusing on what we think is wrong with consumers, maybe we in the industry should focus on how we can serve them better instead.

‘Delivery is still often inefficient and costly. We’ve noticed that online retailers who offer free delivery tend to do a lot better, especially as consumers become more cost conscious. Often consumers do their research online, but then go to a physical store to make the purchase – there are no delivery fees, and they can walk away with their item there and then. Successful e-commerce players offer fast, reliable and low-cost delivery to make up for the loss of the in-person experience.’

Speaking at an awards ceremony hosted by Nigeria’s Centre for Value Leadership in September, Gloo.ng CEO Olumide Olusanya pointed to logistics as a barrier to growth in e-commerce in Nigeria.

‘These challenges lie on poor road network; traffic gridlock among others, which hinders smooth delivery. This is also the reason why it takes between five to seven days for some major players to deliver goods to customers. But we at Gloo deliver on same day because we have found ways around it,’ he said.

‘We have tremendous potential in a large, sustainable market’

KIM REID, CEO, TAKEALOT.COM

Nigeria’s Communications Technology Minister Omobola Johnson says the country’s e-commerce market has a potential value of $10 billion. Right now it is only $550 million, which leaves $9.5 billion up for grabs. Whatever the size of it, there’s definitely a market for e-commerce in West Africa.

‘If sites like Jumia.com.ng, Jumia.ci and Kasoa.com are up and running, it is because they address a market need – in this case linking sellers and buyers conveniently,’ says Sabine Some-Mensah, vice-president of business development services provider Digipact International. ‘Assessing market needs, adapting and responding to them is what drives business, and the experience of e-commerce in West Africa is a good example of this.’

However, there’s still work to be done. ‘In terms of payment, especially the epayment part of it, the process is still very cumbersome,’ says Olusanya. ‘You will need to go from one link to another, several processes in all. But abroad, especially in the US, payment is just one click. I will also say that there have not been local sources for funding, 97% of investments in the sector come from abroad. Nigerian banks have not really been a source of investment for the sector,’ he says.

Payment – specifically secure payment – is also a major concern among consumers in SA. In the 2014 MasterCard Online Shopping Behaviour Study, 90% of SA respondents said the availability of secure payment facilities was critical when shopping online.

‘Consumers want to shop online but they are still nervous about doing so,’ says MasterCard’s SA division president Philip Panaino. ‘This year’s survey confirms that mandating 3D secure payment card authentication, such as MasterCard SecureCode, is an important measure to ensure the sustainability of SA’s e-commerce industry,’ he says.

Arthur Goldstuck, MD of World Wide Worx, says: ‘Online retailers must remember that South Africa has a larger-than-ever base of inexperienced internet users, thanks to improved access to smart mobile devices and increasingly affordable broadband services, who have never shopped online before.

‘These users are still familiarising themselves with using the internet regularly to socialise, communicate and browse for information, so some initial apprehension regarding online shopping is to be expected. As the new user base gains experience and confidence in online activities, their inclination to shop should convert into a regular online shopping habit. To aid this conversion, smart online retailers should recognise the value in educating first-time customers about the security measures put in place within their online stores,’ he says.

It’s perhaps understandable that some African consumers and retailers are still trying to understand e-commerce. ‘Although global e-retailer Amazon celebrated its 20th anniversary in July, e-commerce companies in Africa are only now beginning to mark and/or accelerate their presence in the marketplace,’ says Sumesh Rahavendra, head of marketing for DHL Express sub-Saharan Africa.

‘An example is Nigeria online retailer, Jumia, which despite being founded only two years ago, is quickly gaining market share within the country, which reiterates the region’s potential. Globally, it took over 2 000 years for a formal monetary system to evolve and over 600 years for a formal banking system to be implemented. It’s taken over 50 years for credit and debit cards to be introduced and still not every person has a bank account. With all these milestones that have taken place in the evolution of commerce, it goes to show that how we shop [e-commerce], is still in its infancy.’

E-commerce may still be a baby, but it is growing. InMobi’s 2014 Mobile Media Consumption report, which includes data from 14 000 users across 14 countries (including Nigeria, Kenya and SA), predicted that ‘83% of consumers plan to conduct mobile commerce in the next 12 months’. That’s up 15% from the current figure – and it will only continue to increase as the necessary technology and infrastructure are put in place.

Rahavendra says that as technology continues to evolve in African countries, so will online shopping. ‘It is of our opinion that many African businesses will start to skip the traditional “bricks and mortar” formal retail environment and instead move straight into the online shopping space due to the rise in mobile and internet services within Africa,’ he says.

We’ll see, when our smartphone calendars flip over to 2025, whether or not that prediction is true. Besides, Africa has $75 billion riding on it.

By Will Sinclair
Image: Mr.Xerty © www.nomastaprod.com