If Africa needs a poster child for e-commerce success, it’s Jumia. Taking its queue from online shopping sites such as Amazon and Alibaba, the Nigerian-based site posted 2019 revenues of $176 million. For Africans looking to capitalize on e-commerce, it’s important to know what you’re up against. Africa offers its own unique challenges when it comes to business startups, and internet-based businesses even more so.
Identify Your Best Possible Market
One of the challenges companies such as Jumia face is attempting to enter markets that are not necessarily ready for e-commerce to take root. Cameroon, Tanzania, and Rwanda face the chop, as the infrastructure doesn’t support the business model quite yet. Dangers of expanding into a market prematurely include having to deal with service and delivery issues, which could delay product delivery and create reputational damage for the business. It could also prevent the platform from scaling, as the shortage of suppliers and infrastructure creates an unwelcome sales loop that could potentially increase costs (decrease profits) for the platform.
Dropshipping And Warehousing
While countries such as South Africa and Senegal are already following international trends by providing e-commerce services, they’re also jumping onboard services that make end-to-end delivery faster. In the past, it was not uncommon for warehousing to play a large role in African e-commerce. However, dropshipping is proving to be a gamechanger. Platforms such as Shopify provide internet entrepreneurs with the chance to sell their goods, and the dropshipping fulfillment takes place through Oberlo. A basic requirement for making this work is to check whether the suppliers (through AliExpress) will deliver to the chosen country and whether there is an acceptable payment platform. For e-commerce sites that rely on delivery services – such as subscription box or luxury delivery services – as part of their sales cycle, it’s important to have the supplier and delivery method ironed out before launching.
Closing The Payment Gap
Access to all the payment methods is a constant challenge for African countries, as they face large populations of unbanked citizens. There is also limited access to services such as PayPal throughout the African continent. This has necessitated the need for Africans to seek their own payment solutions. Another fintech that has revolutionized the way Africa does business, is Migo. The startup provides access to payment systems for the unbanked. Partnerships with telecom firms and local merchants mean that greater parts of the population have access to payment portals without actually having a bank account. This allows for access to other financial services such as investments, savings and loans. For internet-based businesses, this kind of technology could close the payment gap experienced by the current lack of infrastructure. While Migo has not announced any partnerships with other fintechs to provide this kind of solution, the model can easily be replicated for this purpose.
As the internet expands into more countries across Africa, it’s no wonder that e-commerce sites are starting to pop up. While there might still be a few challenges that face Africans, ingenuous fintech companies are creating new paths to the unbanked, providing them with simple access to products and services.