Ecommerce in Africa: you will lose money for a long time [T4A]

If you are in the ecommerce space in Africa, you should get out of business now or prepare to be poor for a while. That’s the general message from the Africa Internet Accelerator group.

“We think online entrepreneurs can succeed in building sound online retailers on a continent where ecommerce has been underdeveloped, where logistics, product availability and internet connectivity are daily challenges,” says the ecommerce business start-up and incubator.

Speaking at the Tech4Africa conference, the group agrees that the future of retail will be online and that ecommerce will be multi channelled with mobile shopping and same day delivery coupled with augmented reality and big data leading the charge.

The way it is right now the group reckons ecommerce companies in Africa need to be making around US$100-million a year to breakeven.

TIA: ecommerce in Africa is hard

According to CEO Emilian Popa, Africa has an undeveloped formal retail sector and there is insufficient product selection availability. Add in the fact that mobile penetration and smartphone penetration is growing and you have what seems like a big opportunity to think about reshaping the Africa’s retail with online options.

However that there quite a number of challenges that hinder this opportunity, such as the lack of big enough cities that make ecommerce viable. He also argues that the price of connectivity is far too high on the continent with only two or three countries really ready for an ecommerce play.

Popa says that with ecommerce in Africa you have to ask: how many Africans are online and how many of those people shop online.

“There is a very small market. Online retail in Africa is difficult. Where do you get the product to sell in Africa?” says Popa.

“It’s difficult to bring in products into Africa, and local producers aren’t as easily accessible. Same day delivery is difficult, there are major logistics issues.”

Mobile payments saves the day… sorta

Africa’s saviour is mobile payments, it seems. With an abundance of mobile devices and the rise of mobile payment solutions across the continent, Popa thinks this presents a few ways to get around some of the major issues.

He reckons that for Africa it may be better to launch a mobile ecommerce play rather that desktop platform simply because it is the continent’s device of choice.

But there are still only a few countries in Africa ready for the ecommerce boom that is happening: South Africa, Namibia, Nigeria, Ghana and Northern Africa.

Popa argues that as mobile friendly and online enabled as Kenya is, the country will only ready for proper ecommerce plays in the next two years with other African markets looking more difficult to get into.

“It’s going to take a long a time to make money in ecommerce in Africa,” he says.

He reckons most if not all ecommerce companies in Africa are losing money, even the popular high growth ones.

“They are growing but stores like Jumia (Nigeria’s largest ecommerce store) is years from making money.”

Never give up: it can be done

Though his insights into Africa’s ecommerce space are quite grim, there seems to be light at the end of the tunnel. Apparently with the right team, composed of local and international people and an entrepreneurial mindset, ecommerce stores are being launched around the continent.

“Keep everything variable, get a basic IT platform, use data in everything you do. Keep things cheap, fast and free — lower prices, more selection and better service,” he says.