It’s a universally known fact that ecommerce business in Africa is still in its infancy stage. There are a plethora of challenges that ecommerce businesses face.
However, Africa is also a continent with huge potential. With a population of over 1 billion people and a growing middle class, there is a huge market for online businesses to tap into.
In this blog article, we will be exploring some of these challenges and how businesses can overcome them.
Let’s get started!
The ecommerce business in Africa’s landscape
Africa is a vast and varied continent, home to over 1.2 billion people spread across 55 countries. It’s a region with immense potential for ecommerce businesses, but it’s also a market that comes with its fair share of challenges.
For businesses looking to enter the African ecommerce market, understanding these challenges is crucial to success.
Although challenges abound, there are many ecommerce businesses already claiming success in their endeavours.
Overview of challenges
The challenges to be faced doing ecommerce in Africa are financial, social, cultural, sociological, logistical, and what have you.
These challenges can be significant but can be overcome with careful planning and execution.
The benefits of ecommerce for Africa
The growth of ecommerce in Africa has been spurred by the continent’s young and increasingly connected population. By 2025, it is estimated that Africa will have more than 1.1 billion internet users, which presents a significant opportunity for businesses looking to tap into this market.
There are several benefits of ecommerce for Africa, including:
- Increased access to goods and services: One of the biggest advantages of ecommerce is that it gives African consumers greater access to goods and services that they would otherwise not have. For example, online shopping platforms like Jumia and Kilimall offer a wide range of products from fashion to electronics, which can be difficult to find in brick-and-mortar stores.
- Lower prices: Ecommerce platforms often offer lower prices than traditional retail outlets due to their lower overhead costs. This is good news for African consumers who are looking for deals on everyday items.
- Greater convenience: Ecommerce platforms offer a convenient way to shop for goods and services without having to leave home. This is especially beneficial for busy consumers who don’t have time to go out to the store.
- It also offers a source of employment for the unemployed, especially all those fresh graduates that African universities and polytechnics churn out each year.
Overall, ecommerce provides a number of advantages for both businesses and consumers in Africa.
With its growing population of internet users, the continent is poised for even more growth in this area in the years to come.
11 challenges of ecommerce business in Africa
1/ The challenges of logistics and infrastructure
One of the biggest challenges facing ecommerce businesses in Africa is the lack of reliable logistics and infrastructure.
- Lack of reliable roads,
- Lack of railways transportation and shipping ports, as well as
- Lack of warehouses and distribution centres.
This makes it difficult and expensive to get goods to customers in a timely and efficient manner.
Most developed countries have a well-developed logistics and infrastructure system that ecommerce businesses can rely on.
But in many African countries, these systems are still in development. This can pose a challenge for businesses that want to operate in Africa, as they need to find ways to work around these limitations.
In many parts of Africa, roads are in poor condition and there is a lack of good and effecient public transport.
This makes it difficult for businesses to get their products to customers. They often have to rely on private couriers, which can be expensive and unreliable.
2/ The challenges of doing ecommerce and the issue of payments and banking
Another big challenge for ecommerce businesses in Africa is the payments and banking system.
a) Banking system
In many countries, there is a lack of reliable banking infrastructure and many people do not have bank accounts or access to credit cards. This makes it difficult for customers to make online payments, and also makes it difficult for businesses to receive payments from customers.
b) Mobile money (MoMo) to the rescue
The challenges of payments and banking are major limitations to ecommerce growth in Africa. Although mobile money is becoming increasingly popular, there is still a lack of access to banking services for many Africans.
In countries where mobile money has taken off, the rate of MoMo frauds are overwhelming
This means that many potential customers are unable to make online payments. In addition, cross-border payments can be very difficult and expensive. This makes it hard for African businesses to sell to international customers.
c/ Payment card penetration
Another challenge facing ecommerce businesses in Africa is the low level of credit card penetration. According to WorldPay, only around 2% of Africans have a credit card, compared to around 50% in North America and Europe. This low level of credit card penetration makes it difficult for businesses to accept online payments from customers.
One way around this problem is to use mobile payments, which are becoming increasingly popular in Africa. According to a report from GSMA Intelligence, there were over 310 million active mobile money accounts in Africa at the end of 2017, up from just 22 million in 2012.
3/ The challenges of language and cultural barriers in doing ecommerce business in Africa
Another challenge facing ecommerce businesses in Africa is the language and cultural barriers that exist between different countries.
a) A diverse continent
Africa is a very diverse continent, with over 2,000 different languages spoken. This can make it difficult for businesses to develop websites and marketing materials that are accessible to all potential customers.
b) Cultural differences and languages
Additionally, cultural differences can make it difficult to understand customer needs and wants, which can make it difficult to develop products or services that meet those needs.
The African continent is home to a rich tapestry of cultures and languages, which can be both a boon and a challenge for ecommerce businesses looking to enter the market.
One of the biggest challenges is overcoming the language barrier. While English is widely spoken in many parts of Africa, there are also a large number of Africans who speak other languages, such as French, Portuguese, Arabic, Swahili and Zulu. This can make it difficult to communicate with potential customers and partners.
Aside this, there is the problem of speaking just the basics of the colonial languages, that have become, laughably, the official languages of some countires. How then does the African, with her own rich cultural languages overcome language barrier? Your guess is as good as mine.
c) Cultural nuances
Another challenge is understanding the various cultural nuances across the continent. What works in one country might not work in another, so it’s important to do your research and tailor your offering to each market. For example, in some cultures, it’s considered rude to haggle over prices, while in others it’s expected.
d) The opportunities
Despite these challenges, there are huge opportunities for ecommerce businesses in Africa. The continent is home to a growing middle class with disposable income and an increasing appetite for online shopping. With the right strategy, ecommerce businesses can tap into this growing market and succeed in Africa.
4/ The challenges of customer trust and confidence in ecommerce business in Africa
A lot of African consumers are wary of making purchases online, due to concerns about fraud or scams. This lack of trust can make it difficult for ecommerce businesses to convince potential customers to make a purchase.
In order to build trust with potential customers, ecommerce businesses need to have strong customer service policies in place, as well as policies that protect customer data privacy.
- Many African consumers are not familiar with the concept of online shopping, and
- There is a general lack of understanding about how ecommerce works.
- In addition, there are often concerns about the security of online transactions and the safety of personal information.
Because of these issues, it can be difficult for ecommerce businesses to convince African consumers to make a purchase online.
However, businesses can do a few things to try to overcome these challenges.
- They can provide more information about the products and services that they offer
- Offer customer support in local languages.
- Offering payment options that are familiar to African consumers, such as mobile money, can also help to build trust and confidence.
5/ The challenges of limited internet access as a barrier to ecommerce business in Africa
One of the biggest obstacles facing ecommerce businesses in Africa is the limited internet access that exists in many parts of the continent.
According to recent statistics, only around 35% of Africans have access to the internet, which makes it very difficult for businesses to reach potential customers.
This low level of internet penetration makes it difficult for businesses to reach potential customers online.
Additionally, high costs associated with internet access can also deter potential customers from going online.
According to the latest data from the International Telecommunication Union (ITU), only around 35% of the population has access to the Internet.
This low level of penetration is due to a number of factors, including:
- The high cost of Internet access,
- Lack of infrastructure, and
- Low levels of literacy.
Lastly, many African countries have a limited number of internet users.
This can make it difficult for businesses to reach their target market online. They may need to invest in offline marketing channels, such as television and radio advertising, to reach their potential customers.
The problem that arises is, after undertaking the above move, how do the potential customers get online to place orders?
6/ The challenges of limited mobile access for ecommerce business in africa
In addition to limited internet access, another obstacle facing ecommerce businesses in Africa is the limited mobile phone access that exists in many parts of the continent.
According to recent statistics, only around 55% of Africans have access to a mobile phone. This low level of mobile phone penetration means that many potential customers cannot be reached through mobile marketing or sales channels.
The African continent has seen a boom in ecommerce in recent years, with businesses of all sizes turning to the internet to reach new customers and markets. However, there are still some significant challenges that need to be overcome if ecommerce is to truly take off in Africa.
One of the biggest challenges is limited mobile access. While mobile penetration is growing quickly in Africa, it is still far behind other regions like Asia and Europe. This means that many potential customers don’t have access to a reliable internet connection, which makes it difficult to do business online.
One of the biggest obstacles is the limited availability of reliable internet access. While mobile penetration is increasing rapidly, many parts of Africa still have patchy or non-existent coverage. This makes it difficult for businesses to reach potential customers, and also makes it harder to process payments and delivery orders.
Another challenge is the lack of a unified framework for ecommerce regulations across the continent. This can make it difficult for businesses to comply with multiple sets of rules and regulations, and can also create barriers to entry for new businesses.
Finally, there is a lack of infrastructure and logistical support for ecommerce businesses in many parts of Africa. This can make it difficult to get products delivered to customers in a timely and efficient manner.
Despite these challenges, there is huge potential for ecommerce in Africa. With a growing population and increasing levels of internet access, there is a growing market for online products and services. If these challenges can be overcome, Africa could become a leading player in the global ecommerce market.
7/ The challenges of limited electricity access for doing ecommerce business in Africa
Many African countries experience frequent power outages, which can seriously disrupt businesses that rely on electricity. Even when power is available, it can be expensive, making it difficult for businesses to justify the investment.
This can limit the growth of ecommerce in Africa, as businesses may be hesitant to invest in online platforms and infrastructure when they cannot be sure that they will have consistent access to power.
Blackouts are common, and can disrupt business operations. Businesses need to have backup generators to ensure that they can continue to operate during power outages, which is costly.
8/ The challenges of limited skilled labour in the ecommerce sphere
In many countries across Africa, there is a limited pool of skilled labour to draw from. This can make it difficult to find employees with the right skill set to help grow your business.
In addition, the lack of skilled labour can also drive up wages, making it more difficult to compete on price.
9/ The challenges of political instability
The challenges of political instability in Africa can be a hindrance for businesses, particularly those engaged in ecommerce. Many African countries are beset by internal strife and conflict, which can lead to a variety of problems for businesses, including:
- Disruptions to supply chains and the flow of goods
- Difficulty in recruiting and retaining staff
- Decreased levels of customer confidence and spending
- Problems with access to funding and investment
These challenges can be compounded by the fact that political instability often goes hand-in-hand with other issues such as crime, corruption and poor infrastructure. As a result, businesses operating in Africa can often find themselves dealing with a number of different problems at once, which can be difficult to manage.
10 / Lack of funding availability
For African ecommerce companies, a fundamental obstacle is the lack of funding availability. A lot of small and medium-sized firms have trouble getting the funding they require to develop and expand their operations. This may be the result of a number of things, such as the absence of collateral, a weak credit history, or a simple ignorance of the numerous financing options available, however, this posses greater obstacles for startups that would want to go into ecommerce.
It can be challenging for African ecommerce companies to invest in the resources and infrastructure they require to succeed without access to loans. This covers every aspect, from employing staff and stocking shelves to marketing and advertising.
Because of this, many are compelled to rely on their own savings or loans from family and friends, which might not always be sufficient to support their operations.
However, there are a number of initiatives and programs designed to increase the availability of finance for African ecommerce enterprises. These include, among others, lending programs backed by the government, platforms for crowdfunding, and microfinance organizations. By utilizing these tools, African e-business owners can get the funding they require to expand and succeed in the cutthroat online market.
It is clear that ecommerce business in Africa presents a number of challenges for entrepreneurs, especially new entrants. From the lack of reliable payment infrastructure and limited access to credit, to the challenges of logistics and delivery, doing ecommerce in Africa requires a unique set of skills and strategies.
However, despite these challenges, there are many opportunities for those willing to take on the risk and work to overcome these obstacles. With a growing population and increasing internet access, the ecommerce market in Africa is expected to continue expanding in the coming years.
As such, it is an exciting and potentially lucrative opportunity for those who are willing to put in the effort to succeed.