Novel opportunities available in African e-commerce space

By Tom Jackson

A range of ingenious solutions to logistics challenges in the African e-commerce space demonstrate that the continent is full of opportunity, according to an analyst.

Gareth Mellon, ICT programme manager at Frost & Sullivan Africa, told Disrupt Africa that e-commerce on the continent was poised for healthy growth as internet penetration increased alongside the demand for more formalised retail.

Frost & Sullivan believes Africa’s e-commerce market – worth US$8 billion in 2013 – will grow to a value of US$50 billion by 2018, while numerous other experts expect there to be significant growth.

Yet challenges remain, according to Mellon, ranging from difficulties with distribution to regulatory hurdles, trade barriers and a lack of reliable payment systems. Infrastructure is also a serious issue, with problems such as these curtailing the revenues of the likes of Jumia, Konga and Takealot, and leading the likes of Naspers to decrease their commitment to the sector.

Yet Mellon said a range of “ingenious responses” to issues in the logistics space – whether in the form of innovative delivery mechanisms, including drones, or centralised distribution centres, points to the novel opportunities available in the space – show that the continent is full of opportunity.

“Given the broad acceptance of mobile money and Africa’s record of technology leaps, it is not inconceivable that some areas may move directly from informal markets to on-demand e-commerce, skipping the stage of formal retail development that has characterised more developed markets,” he said.

Mellon said the lack of existing retail infrastructure can be seen as both a hindrance and an opportunity for e-commerce providers, with companies having the opportunity to introduce new solutions without having to deal with the difficulties associated with entrenched legacy systems or vested interests.

Niche e-commerce has proven popular for investors in recent months, and Mellon said he understands the attraction to more focused platforms.

“Locally, the most successful e-commerce platform is probably Yuppiechef, which caters to a very niche market,” he said.

“This has meant that it has been able to obtain relatively good margins on its products, as opposed to more general e-commerce retailers that must compete with supermarkets and other brick-and-mortar stores.”

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