With online shopping still in its infancy across most of the continent, parts of Africa are starting to capitalize on the continent’s huge potential for ecommerce.
A recent report by McKinsey & Company suggested that online channels could account for 10% of African retail by 2025 – at least in the continent’s largest economies.
Barriers yet to be overcome include consumer security concerns, low bandwidth, frequent power outages, and the very significant logistical problems associated with poor infrastructure and inadequate postal services.
What’s also clear though is that consumer spending power is on the rise, especially in countries such as Nigeria with an emerging middle class. People are increasingly urban, IT infrastructure is improving, and smartphone penetration is on the rise.
Sim Shagaya, CEO of Nigerian online shopping portal Konga, Nigeria’s largest online mall, summarized the problem: “Africa does not lack an abundance of people to buy things, sell things, or move them around. What Africa lacks is a 21st century operating system to make it all work.”
Frustration with the challenges of logistics on the continent has led to some innovative ideas, some of which may actually get off the ground.
With roads in poor condition and populations living in inaccessible areas, delivery by air is being seriously considered as an option in Africa. The speed of growth in consumer demand is arguably too fast for road networks to keep up with.
In Lagos, Nigeria’s most populous city, there’s no functioning postal service and road traffic is horrendous. Poor roads increase logistical costs through higher fuel consumption, depreciation of delivery vehicles, lost and damaged goods, and slowing down the whole delivery process. Amazon is already in experimentation mode with drone delivery for its global business, suggesting drone delivery is a serious proposition for worldwide ecommerce.
But it isn’t only Amazon that’s been playing with the idea of air delivery for Africa. Non-profit foundation La Fondation Bundi is hoping to pioneer a new form of flying robotic transportation system for heavier cargo than Amazon-style drones can currently manage. Known as ‘flying donkeys’, they are designed to carry up to 20kg over 50km on low-altitude routes within one hour. Mostly designed and built in Africa, by 2020 it’s hoped these flying cargo drones could be in operation across the continent.
However, 2013’s Westgate Mall terrorist attacks in Nairobi have delayed plans as Kenyan aviation authorities felt unable to give legal go-ahead for autonomous flight in the wake of the incident. Despite this delay the foundation is still committed to its ideas. Security concerns associated with unmanned flight are not unique to Africa and have affected plans to launch drone delivery in other parts of the world, including the States.
Motorbike courier services such as Sendy are already up and running. Sendy is a motorbike courier system, built along the lines of Uber, presently running in Kenya. The app connects customers who want deliveries to be collected with freelance drivers willing to fulfil the order, and app creator Sendy acting as go-between.
It’s a model that could be duplicated across the wider continent. Motorbikes are common in Africa, cheap models are available for under $1000 and over 90% are owned purely for business purposes.
The ability to both track and rate your driver using these kinds of apps may help overcome security concerns. However, the payment options aren’t flawless and many people in Kenya and across the wider continent don’t have credit card access for easy online payment.
Other models of motorbike delivery are also operational at present. Nigeria-based ecommerce portal Jumia, known as ‘the Amazon of Africa’, already operates in Egypt, Morocco, Ivory Coast and Kenya. The ambitious ecommerce retailer has chosen to run its own fleet of motorcycles, however it stops deliveries at 7pm to minimize the risk of robberies.
Pick up points are already in use in places like Europe and the States. Argos and Ebay have an agreement in place to allow customers to collect Ebay purchases from Argos stores, whilst Amazon’s Locker Delivery collects purchases from passcode-protected lockers situated in public venues such as train stations.
Pargo offers the same kind of service in the Cape Town area with ambitions to spread more widely across South Africa. Logistics operators Aramex and InPost also have plans to collaborate to provide a similar service in South Africa.
It’s arguable whether it’s a good idea to compare what happens in the Cape Town area to the rest of Africa as this location is in many ways different to the wider continent. It’s more cosmopolitan, wealthier and has much better infrastructure.
Best described as ‘like Uber for deliveries’, Wumdrop’s courier service is presently running in Cape Town. The idea started out when a nappy delivery service found they couldn’t find a reliable courier. Deciding that owning their own fleet was too great a capital risk, they came up with the idea of using the excess capacity of drivers already offering delivery services for larger couriers. Leads are generated from the WumDrop app, which gives senders access to couriers in real time and allows them to despatch their goods as soon as they want to send them – much like a taxi service for goods.
WumDrop’s on-demand courier service lets you send anything to anyone over short distances in a small amount of time, for little money via mobile app or website. Again, it isn’t clear whether a service like this, which thrives in Cape Town’s unique environment, is likely to succeed outside this location.
There are other innovative approaches being taken to improve the spread of ecommerce in Africa. In Nigeria, many people still mistrust online shopping, so ambitious shopping portal Jumia is going out onto the streets to educate them.
The ecommerce site is sending sales agents out with tablets to demonstrate to consumers how to make a purchase online, answering their questions and addressing concerns. It can be a struggle as many are suspicious of fraud when it comes to online commerce.
Whilst some innovative ideas are presently confined to the livelier economies of South Africa and Nigeria, there’s real innovation afoot which could help improve the spread of ecommerce and overcome logistical difficulties all across the African continent.
Will these innovations spread?
What several of these ideas have in common is that they seem focused at present only on South Africa, specifically Cape Town. This part of the continent is one of the more developed parts of Africa, and offers some of the best infrastructure. It’s arguable how quickly ideas will spread from here to other fast-developing African economies. What’s clear at least is that innovative logistics have a foothold in the continent, although it remains to be seen how quickly these can spread into other developing countries in Africa.