Skip to main content

Chipper Central

The Official Chipper Blog

E-commerce in Africa: How to get in on the bandwagon

  • March 25, 2022
  • |
  • 6 min read

Africa is known for jollof rice, safari rides, and Afrobeats. 

But thanks to a near-decade of explosive growth, it looks like we’ve got a new item on the list—e-commerce. According to the International Finance Corporation (IFC), the number of online shoppers in Africa has increased by 18% year-on-year since 2014. Analysts predict a similar growth over the next decade.

This staggering growth is a result of a few key things:

  • A surge in internet penetration on the continent, 
  • And a vast young, digitally savvy African population. 

In 2021 alone, Africa saw a 55% increase in online retail spending. 

Even though these forecasts paint an optimistic picture of Africa’s e-commerce future, the reality is not a steadily rising graph. Africa must overcome the inherent challenges and flaws that plague the continent to realize its e-commerce potential.

Let’s look at these obstacles, the opportunities that exist despite them, and how you can participate in Africa’s e-commerce boom.

The challenges

Here are the major roadblocks on Africa’s path to becoming an e-commerce giant:

  1. Payments

Online payments typically require trust and bank accounts. And both are grossly lacking in Africa’s e-commerce landscape. About 57% of Africa’s population don’t have a traditional bank account. And the prevalence of fraud and cyber theft makes the majority of the population wary of online transactions. 

So, a majority of Africans prefer cash transactions. It’s more tangible and familiar than digital payments.

  1. Logistics and infrastructure gaps

The lack of proper national address systems in most African countries is a significant logistical roadblock. There’s no structure to town/city plans in most cases. So, it’s challenging to get precise directions to a customer’s residence.

E-commerce merchants and delivery personnel must rely on customers’ descriptions to describe addresses and landmarks. This, combined with poor road networks, makes it even more difficult to deliver products to customers on time. 

These inconveniences sometimes drive up the delivery cost, making more people uninterested in online purchases.

  1. High cost of internet services

Only about a third of Africans have access to an internet service to shop online. To boot, internet data is expensive. And those who manage to connect to the internet have poor internet connectivity. 

All of these barriers make online shopping an unattractive option for most Africans. Combined with the distrust in digital transactions, most Africans consider purchasing items from physical stores safer and cheaper. 

  1. A lot of markets remain underserved

Africa is a vast continent–we’re talking 1.3 billion people, and that was as of 2018. But, the majority of that population remains unreached by the continent’s e-commerce platforms. 

The International Trade Centre (ITC) report revealed that Africa boasted 631 online marketplaces as of 2019. That sounds like a decent number, but a closer analysis shows that only ten countries are responsible for 94% of all online business in the continent. To make matters worse, some of the 631 online marketplaces don’t even satisfy the standard requirements of e-commerce. 

This disconnect is partly because many online marketplaces only allow sellers from specific geographic areas to participate. The largest and most active sites are typically found in the most advanced and largest economies rather than being widely available. According to the report, only three out of ten international marketplaces are open to sellers from more than 50 African countries.

  1. Gender differences

Africa’s deep-seated gender divide is part of the issues hindering the growth of eCommerce on the continent.  

For example, women were the primary purchasers in 60% of South African households, according to a 2019 study.

But, in Africa, women are less likely to have a bank account, credit cards, or mobile money. In Kenya, the African leader in mobile money accounts, women own 8% fewer than men, and credit card ownership among women (4%) is half that of men.

This means that most women rely on their partners for payment or use cash-on-delivery options on online marketplaces. 

The opportunities 

Necessity is the mother of invention, they say. And Africa’s e-commerce woes are fertile ground for building systems and infrastructure that will pay dividends for centuries to come.

Here are the greenlights that indicate Africa’s potential for eCommerce growth.

  1. Internet usage is on the rise

According to Statista, internet usage in West Africa saw massive growth between 2000 and 2021. The growth rate hit a whopping 912% in Togo, making it the country with the highest increase. In São Tomé and Príncipe, internet usage rose by 882% within the same period. 

Other West African countries with the highest rates, like Cape Verde, Mali, and Nigeria, boast internet penetration rates of over 60%. 

Southern Africa is experiencing similar levels of wild adoption. As of January 2021, the region had the highest internet penetration rate in Africa, at 62%. The share of people using the internet in this area of Africa was even above the world average, which is 59.5%. 

With Africa’s rapidly growing population, younger people will remain the largest demographic for decades. That fact, coupled with the internet penetration surge, means that Africa has all of the ingredients for rapid growth in its overall economy and eCommerce.

  1. More people are embracing e-commerce

Online marketplaces are expanding, and more African consumers are turning to e-commerce, particularly in the wake of the pandemic. This paves the emergence of a slew of new e-commerce tools and platforms.

According to a Mastercard study on consumer spending, nearly four out of five surveyed Kenyan consumers have increased their online shopping since the COVID 19 pandemic began.

With fewer opportunities to shop in a mall or on the high street, social media has become the primary platform for discovering the most appealing products and deals.

  1. There’s an emergence of technologically enabled business ecosystems

Africa is currently experiencing a wave of innovation. The startup space has seen explosive growth as fintech and logistics companies develop systems to address the continent’s digital and logistical woes. 

These systems make it easier for people to participate in the e-commerce world by removing the friction that comes with buying and selling goods and services online. 

Read Also: Fintech for Good: How Africa’s Fintech Revolution is Supporting Sustainable Development

A prime example is Chipper Cash’s collaboration with mobile games publisher Carry1st and payments FinTech firm PayPal to launch Carry1st Shop.

Carry1st Shop allows people all over Africa to shop online for virtual goods and digital services, such as pre-paid electricity and mobile data, as well as online game assets. People can pay for the new product using various methods, including mobile money, cryptocurrency, and bank transfers. 

Getting on the African e-commerce bandwagon 

What does Africa’s eCommerce growth mean for you? Whether you’re a business owner or a consumer, here are a few reasons why you should jump on Africa’s eCommerce bandwagon. 

  1. Consumers can enjoy flexibility and time savings, especially as companies:

Work to remove the pain points that consumers face when purchasing goods online.

Online shopping is much more convenient than in-store shopping, and this is especially true in Africa because most physical markets are loosely structured. And looking around for items can be stressful and time-consuming.

Consumers can access nationwide catalogues of goods. And enjoy hassle-free delivery as companies make online shopping as seamless as possible.

For example, Jumia deployed local motorcycle dispatch riders in every region in Nigeria and Kenya. The riders are more familiar with the local landscape and can access non-motorable roads, eliminating delivery hassles to rural areas.

Educate consumers about the safety and transparency of digital payments

To address customers’ distrust in online payments and cater to the unbanked, most African e-commerce platforms provide mobile payment options during the checkout process. 

Like Nigerian e-commerce behemoth Jumia, others adopt a “pay on delivery” model that allows customers to receive and examine delivered items before paying. With flexible return policies, merchants can also assure customers of their legitimacy.

  1. For business owners, eCommerce platforms present priceless opportunities. Small business owners can boost visibility, grow their brands, and increase revenue in a much safer and cheaper way.

They can leverage the platform’s audience, and gain access to customers in various geographical locations. Most eCommerce platforms take care of delivery for a small fee so merchants can trade without logistics hassles.

Get In While You Can

Getting on a bandwagon typically has a negative connotation to it. 

But in the case of eCommerce growth in Africa, it’s a ride that promises a long-term reward. Not only by improving quality of life and modes of commerce but also by laying the groundwork for other industries to benefit from. 

Yes, the journey will be bumpy, but the destination is well worth it. So get on board, hold on tight, and sign up on Chipper to take advantage of simple payments, cross-border transactions, and investment options. All from your smartphone.

More amazing articles for you

Want updates straight in your inbox?

Enter your email to get the latest news and announcements from Chipper Cash.