The Scramble in Africa to Own the Third Shelf

Off the back of a successful week for Dentsu in Kenya in e-commerce, I have been getting a lot of request to put out content around e-commerce. Earlier this year, I had done an extensive study on how e-commerce is shaping up on the continent and the purposes of me doing this LinkedIn article is to revisit some of those findings.

E-commerce has become a powerful force driving economic change around the world. Digital commerce deploys new technologies in ways that have effects on the physical economy of goods and services. The e-commerce channel has delivered consistent double-digit year-over-year growth prior to Covid-19, and the 2020 projection is set to be the strongest year yet, with +22% growth driven by the massive shift from offline to online owing to the pandemic.?

That being said, e-commerce now more than ever offers merchants rich potential to improve the customer shopping experience, increase sales and future-proof their business.

As a result, markets across SSA (South Africa, Kenya, Nigeria, C?te d’Ivoire, Ghana, Senegal and Rwanda) have seen the race towards growth of last-mile delivery in a scramble to own the third shelf.

This has been catalysed by players such as Glovo, Uber, Jumia and Sendy, which are currently working with traditional retailers to build up their last-mile delivery powered by technology provided by said players.?

I will attempt to debunk the state of e-commerce, analysing the shifting landscape with a move from what has been a traditional e-commerce model (predominant warehouse and marketplace models) to the rise and thriving aspects of social marketplaces marred by last-mile delivery players who are defining the landscape today.?

The United Nations Conference on Trade and Development E-commerce readiness index is one measure of the current potential of digital commerce in Africa.

It combines existing data on Internet connections, secure servers, payment accounts and postal infrastructure to create a scale of readiness that ranges from 0% to 100%.

In general, of all the continents surveyed, the lowest-scoring countries are in Africa.

Among the leading markets in Africa are South Africa, Kenya and Nigeria, which we have explored further. However, it is clear that there is a great diversity of starting positions across the African continent, so any discussion of policy measures will ultimately have to be grounded in the specific local context.

It is pretty clear that while other markets’ global e-commerce transactions are in the billions of dollars, SSA is still in the hundreds of millions of dollars.?

Factors Contributing to the Shaping of the e-commerce Landscape in Africa

1. Growing labour force with rising youth share

It is projected that 500 million African youth will turn 15 between 2015 and 2030.

2. Rising Internet connectivity

As a result of the growing population, more than 500 million mobile broadband users in Africa were recorded in 2020, with this likely to grow by a whopping 70% by 2030.

3. Increasing access to digital payments

With the continued growth of mobile money, and “transactability” no longer being a major constraint, at least domestically across markets, access to digital payments has catalysed contactless payment options in these markets, therefore facilitating e-commerce growth.

4. Growth power of super platforms

These business models have deep pockets and invest in long-term research and development. We have particularly seen Facebook and WhatsApp take a keen interest in the space based on the recent launch of Facebook Marketplace, which is looking to attract micro-entrepreneurs who are already using the Facebook ecosystem to sell products and services. Other players investing in super platforms that consumers are increasingly getting used to are Uber, Jumia, Glovo and Sendy, which are growing into different African markets and positioning themselves as super platforms, especially on the last-mile delivery aspect.

5. Continued urbanisation

The urban population will reach 770 million by 2030, as projected by the United Nations in a youth unemployment study carried out in 2019. This is a massive increase of 63 million from what was previously recorded in 2015.?

For more about the state of e-commerce in Africa, check out the Dentsu Wisdom Series website to download the E-commerce Like Never Before White Paper.

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