From phones to fashion to rice: Online shopping gaining traction in Africa

While it is still relatively early days for online retail in sub-Saharan Africa, recent years have seen the emergence of a number of companies vying to become the Amazon of their respective territories.

Charles Brewer, managing director for sub-Saharan Africa at DHL Express

Charles Brewer, managing director for sub-Saharan Africa at DHL Express

“Buying and selling online is growing year on year in Africa,” says Charles Brewer, managing director of DHL Express in sub-Saharan Africa. As the company responsible for shipping many of the products sold online, DHL has a unique vantage point of the industry.

South Africa, arguably the continent’s most developed economy, had a relatively early start in online retail – Kalahari, one of its biggest online retailers, was founded back in 1998.

The industry is also developing in other parts of the continent, especially Nigeria, Africa’s most populous country with an estimated 170m people.

The opening lines of a recent article by technology site TechCabal announcing a new online retailer is indicative of the growth the industry is seeing.

“Does Nigeria need another online store? Yea or nay, your opinion doesn’t really matter, they just won’t stop launching,” said the writer.

Two of the top online retailers in Nigeria are Jumia and Konga. Both companies sell a variety of products from mobile phones to fashion. In 2013 Jumia’s top-sellers included Nokia Lumia phones, LG washing machines and the Mama Gold brand of rice, which Nigerians bought for the older members of their families over Christmas.

Africa Internet Holding (AIH), the company behind Jumia, has also rolled out the brand to Kenya and Côte d’Ivoire. AIH operates a host of other e-commerce-related operations, including South African fashion site Zando.

In Ghana, electronics and fashion retailer Ahonya has attracted investment from Rio Partners and Nairobi-based Savannah Fund, which invests in early-stage tech startups.

Teething problems

However, online retailers in Africa face a myriad of challenges, including a lack of general infrastructure and the fact that online shopping is still a new concept for many people.

Konga CEO Sim Shagaya says human contact is essential in Nigeria’s young e-commerce market. “You want to build a connection with people. They still want to feel that there are human beings behind the system.” It is for this reason that after customers place their orders, they receive a call from Konga’s team to assure them that the order has been received.

To address online payment fears, Konga also allows its customers to pay in cash on delivery. “E-commerce arrived in Africa at a very different time from when it arrived in the US. At the time when Amazon was kicking into gear, there was a culture of credit card use, and the formation of digital payments. But here it is all happening at the same time. Card penetration is still low, people are still getting used to this idea of being able to pay for things electronically – and cash is still king,” notes Shagaya.

In 2011, South African-based emerging markets media giant Naspers pulled its own e-commerce offering, Kalahari, from the Nigerian and Kenyan markets. In a statement at the time, Naspers said “the performance of the service has been below expectation since the launch and reaching profitability was not a reasonable near-term prospect”. Interestingly, Naspers has since made an investment in Konga.

Mbwana Alliy, managing partner of the Savannah Fund, says Africa’s online retail industry has the potential to be lucrative from an investor perspective. “It is attractive when ventures can get over the classic problems of payments and delivery as well as educate the market to buy online, which requires a lot of trust in a brand.”

Connecting African businesses with the world

The internet has also opened opportunities for African companies and artisans to market their products internationally.

Kenya-based startup Soko’s e-commerce platform enables local craftswomen to sell their handcrafted jewellery to consumers worldwide.

“If you go to most informal settlements you will notice the majority of the women do beadwork but they don’t really earn a lot of money. There are so many economic discriminations they face. We wanted to transform these micro-entrepreneurs into global entrepreneurs by giving them exposure and visibility through the Soko platform,” says Catherine Mahugu, one of Soko’s co-founders.

Ethiopian footwear company soleRebels has also found great success in selling its handmade shoes online. The company’s founder Bethlehem Tilahun Alemu has won numerous entrepreneurship awards, posing in pictures with the likes of Richard Branson, and regularly speaks at conferences across the world.

According to DHL’s Brewer: “The growing internet user penetration in Africa provides a sizeable opportunity for small and medium sized enterprises, and as Africa continues to adopt e-commerce as a way of life, businesses are able to leverage this online market, while reducing traditional customer acquisition costs.”