According to Statista (data analysis company), the African e-commerce market in 2017 was worth $16.5 billion. Another report by McKinsey pointed out that by 2025, this number is likely to rise to $75 billion. These predictions do seem to be very optimistic and tempting, but in fact, if these positive predictions are to become a reality, many obstacles that hinder the development of e-commerce on the African continent must be resolved.
First, from the global ranking given by UNCTAD (UNCTAD), this ranking is based on the average of four indicators: Internet usage, the proportion of bank account holders, the security score of web servers, and the reliability of postal services. Sex score. Based on these indicators and the e-commerce index of each country, African countries are currently not performing well. For example, although Mauritius, Nigeria and South Africa are the highest-scoring African countries, they are still at the bottom of the global rankings.
- Internet penetration rate is not high
Why is there such a situation? There are many obstacles to the development of e-commerce in Africa, which can be found at different stages of the people’s buying process. Of course, it all starts with the Internet penetration rate. A 2016 study by Deloitte showed that only 20% of people on the African continent have access to the Internet. Although network coverage has gradually increased over the past few years, further improvements are needed to reduce consumer use costs and provide faster network speeds to meet sites and platforms that require higher bandwidth.
- E-commerce fraud rate is high, logistics and infrastructure are not perfect
However, even if Internet penetration has increased, African consumers lack trust in online businesses. This lack of trust can be traced back to a variety of scams, such as phishing emails or prepaid scams, and the uncertainty of whether online shopping products can be delivered. The latter is closely related to another issue: logistics and infrastructure. The address situation in Africa is very complicated, and consumers often only describe the address of a big city. In addition, postal services in Africa are not always reliable. And cross-border delivery has additional cost issues that further delay the transportation of goods.
- The mainstream payment method is still cash on delivery
In addition to this, there is a big problem is the payment method. Currently, the most common payment method in the African market is cash on delivery, and 90% of online shopping orders are paid in cash. Africans have little or no access to banks, and only 10%-15% have their own bank accounts. This situation is not conducive to the development of the e-commerce market, because most online retail stores and services require consumers to have their own bank accounts or be able to use the payment services connected to them.
What problems are currently being eased?
Interestingly, these difficulties have also encouraged many companies to introduce innovative solutions to overcome or solve these problems. For example, the price of smartphones has become more affordable in the past few years. Technology giants such as Google and Facebook are betting on online businesses in Africa. They have developed applications that reduce traffic consumption, and even find ways to make Internet pages consume less traffic, thus reducing the cost of networking.
Nipost, a Nigerian postal service company, also used the What3words location system service to correct the approximate mailing address. The system divides the entire globe into a 3m x 3m square area, each with its own three words to indicate its address. It can be seen that Nipost is better prepared for mail and parcel delivery.
In terms of online payment, while waiting for more and more African people to open bank accounts, more and more e-commerce platforms (mainly African local platforms) have switched to mobile payment as payment methods during the checkout process. As Marc Wabi of Deloitte said, mobile money will inevitably promote the development of the African e-commerce market. More mobile payment methods can be found here!
The development of infrastructure such as the Internet and network coverage, as well as the development of logistics such as mail addressing and postal service reliability, are important issues to be solved. Africa does have the potential to achieve significant and lasting e-commerce growth, but the premise is to clear the obstacles on the current path of e-commerce development. Everyone involved in this market now has the responsibility to do everything in their power to make it truly thriving.