E-commerce becomes a force in African retail market

E-commerce is poised to dominate African retail markets over the next five years, says the Africa CEO of Kaymu.com, one of the more successful online commerce sites in the region. While market watchers may not be quite as optimistic in their forecasts, no one disputes that e-commerce on the continent is starting to take root.

Elias Schulze, the head of http://www.kaymu.com.ng/ sites in 16 countries across Africa, said e-commerce is now one of the key and arguably the leading enabler for growth within the consumer sector across in the region.

“We believe the knock-on effects in terms of democratizing commerce for the hungry SME sector will be tremendous ... from increasing market efficiency and price finding to creating literally millions of jobs to support Africa’s demographic shifts,” Schulze said.

“That said, we anticipate various adoption rates based upon how quickly internet penetration deepens, education levels grow, GDP per capita shifts and existing retail backbone shifts,” Schulze said. “Overall, we shouldn’t be surprised if significant portion of retail, and perhaps the majority in key markets, is captured within e-commerce by 2020.”

Schulze’s forecast is in line with expectations of other investors in the e-commerce sector in Africa, said Thecla Mbongue, a senior research analyst at Ovum. Ovum’s Digital Africa Survey 2014 reports that 46 percent of the poll’s respondents believe that e-commerce will be the most important digital service generating increased revenue for African industry over the next five years.

“The increased level of data connectivity, mobile financial services and usage of smartphones will boost traffic on e-commerce platforms,” Mbongue said in email.

The African retail market is expanding quickly enough so that major players may not need to scramble with one another to get a share, Schulze said.

“I believe we are all working to crack, at varying degrees of success depending on the firm, the inherent challenges of working in frontier Africa —- logistics, infrastructure, internet penetration and seller/buyer awareness,” Schulze said. “In the long run, we will be competing for market share like the OECD world but right now the pie is expanding so quickly, I’d like to think we don’t have to fight over taking pieces from each other.”

Some market observers are not quite as optimistic.

“I believe it’s possible for certain e-commerce verticals to represent the lion’s share of African retail in key markets—but that’s not the full story,” said Johann van Tonder, a consultant with AWA digital, e-commerce conversion specialists based in the U.K. and South Africa. “I don’t see e-commerce on the whole achieving this status within 5 years,” van Tonder said via LinkedIn.

“A recent McKinsey report predicted that, by 2025, e-commerce would make up 10 percent of total retail sales in key African markets. Considering another forecast of 40 percent annual growth for African e-commerce sales in the next 10 years, this is realistic,” van Tonder said.

Sub-Sahara Africa is being targeted as the next big thing by retailers because of its population of close to a billion people, increasing proliferation of mobile phones and its urbanization rate, the fastest in the world, according to AT Kearny’s 2014 African retail development index.

Schulze believes that Kaymu.com, which is backed by Africa Internet Group (AIG), owned by Rocket Internet, MTN and Millicom, will continue its expansion drive, and expects to announce a 17th African operation before the end of the year.

Schulze, who is 29 years old, says his career so far has hinged on his early entry into the continent, after he finished his graduate degree in 2008. “I’ve decided that Africa by far is the most interesting, impactful and innovative place to focus on and been blessed enough to have had encouraging mentors and people willing to give me a shot from an early tenure,” he said.

Startups competing with Kaymu, though, may have a formidable challenge, since the online retailer benefits from the deep pockets of AIG. Last week, Jumia.com, an online retailer that is also a part of AIG, announced a new round of investments amounting to US$150 million.

Berlin-based Rocket Internet was the first investor in AIG “Rocket Internet’s mandate is to found internet companies within primarily underserved or untapped markets,” said Nils Seger, a spokesman for AIG. “Rocket and Africa Internet Group (AIG) strongly believe in the growth and dynamic future of Africa and remain deeply invested to growing alongside the continent.”

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