July 31, 2017

With Smartphones as the Gateway Tool, Annual E-Commerce Sales in Africa Could Reach $75 Billion Within the Next 5-10 Years

"The African e-commerce sector is growing strongly, largely on the back of increased smartphone take-up among African consumers, who are using mobiles to access a variety of e-commerce shopping platforms," according to a report, How technology is driving retail in Africa, published by The Economist Intelligence Unit (EIU). "This increasing access to technology, via avenues such as smartphones, is helping consumers in previously hard to reach areas to access all manner of e-commerce opportunities, including emerging African fashion. Estimates as to the potential value of Africa's e-commerce vary, but it could be worth as much as US$75bn per year within the next decade."

The report, however, notes that "several obstacles to e-commerce growth remain, including fear of fraud among African consumers, a logistics network beset by problems, the fragmented nature of African retail markets, a pressing need to improve telecoms network infrastructure and the entrenched problem of illiteracy among a significant proportion of the African population.

In its Executive Summary, the report explains how it uses "data to highlight the countries and metro regions in the African continent with the biggest potential for e-commerce growth, while highlighting the trends and developments in the market." Furthermore, "In this report, carried out in collaboration with analysts across our telecoms, retail and African editorial teams, we show how smartphone adoption and usage is helping to shape the African retail sector and bring a broader range of retail options to increasing numbers of consumers in the region."

The report's key takeaways include:
  • Nigeria is in pole position to take advantage of e-commerce potential, on the basis of its high business environment opportunity potential;
  • Estimates suggest that e-commerce sales in Africa could reach somewhere in the region of US$50- 75bn per year within the next 5-10 years;
  • Smartphones are a gateway tool to the internet for Africans, especially in Nigeria, where the mobile penetration rate is forecast to rise from 103 per 100 in 2016 to 122 per 100 by 2021;
  • Jumia and Konga are two of the biggest e-commerce companies in the continent, and in Nigeria nearly three-quarters of users access the Jumia platform via their mobile phones; and
  • Despite the opportunities, fear of fraud, poor transport and mobile infrastructure, supply-chain barriers and the fragmented nature of retail markets in Africa will hold back e-commerce growth in the continent.
Are you planning to invest in Africa's e-commerce sector?

Aaron Rose is an advisor to talented entrepreneurs and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.

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