I have recently started asking friends to list African e-commerce stores from which they have bought physical goods. Most can’t name one, with the odd exception. Our western counterparts, on the other hand, are shopping regularly for an overwhelming number of physical goods at numerous online stores.
Forrester predicts that online sales will account for 17% of all US retail sales by 2022, up from a projected 12.7% in 2017, according to Forrester’s new Online Retail Forecast as cited by Digital Commerce 360. The report also expects US online sales to grow five times faster than projected offline sales growth.
This begs the question why Africans are not yet shopping online while majority of the world moving toward more and more to e-commerce?
There is a story we’ve told ourselves as Africans to explain why we don’t shop online. We’ve all heard the arguments and many of us have used them repeatedly: Africans are nervous to use their credit cards online or most don’t have any; internet speeds are slow; the postal service is unreliable; we don’t trust that our orders will actually arrive; we still want to touch and feel products before we buy them. I used to tell that story but now I have a different outlook.
I have attended several tech events where they invite experts to explain the digital landscape in Africa, but I have never been satisfied with any of their answers as to why e-commerce has not caught on.
It turns out the reason why a click on a user’s web browser doesn’t exactly translate into an actual sale is really simple
- Trust.
- Physical address system.
- Available payment method.
Trust
Trust is perhaps the biggest challenge facing online retail, specifically in Africa. This is a market where due to a history of being conned, consumers are skeptical or suspicious about the functional mechanisms of e-commerce.
From a functional perspective there are two types of uncertainty.
- System-dependent uncertainty, Consumers are wary of sending their money to an unknown platform with the promise of delivery.
- Transaction-specific, consumers like to see and touch the product they want to buy before buying.
Physical address system
It seems to me that most African online shopping stores existing templates that have worked in developed economies where physical address system is quite organized. They completely neglect the realities of their operating environment where organized neighborhoods, well labelled streets and addresses are nearly non-existent.
payment processor
Online credit card payment system is the most common type of payment system for e-commerce. The actual transfer of money from the credit card issuing bank to the merchant happens in several days this create liquidity shortage for businesses.
Using traditional credit card for online payment in Africa has got a number of limitations. The most common limitations are security and transnational cost. Merchants are forced to pay from 2% to 5 % of the purchase and from $0.20 to $0.30 per transaction. This high transaction cost makes online credit card payment not favorable for any merchant to utilize.
Merchants also face a risk since consumers can repudiate charges once goods have been delivered to them. The other challenge for e-payment is proper infrastructure. For the effective deployment of e-payment, it is necessary to have a reliable and cost effective infrastructure that can be accessible to the majority of the population.
Moving forward with out addressing all aspect and difficulty of e-commerce in Africa will bring us disappointed customers and had led people to sharing stories of poor online experiences, thereby low returning customer rates.
Understanding online channel can be one that people will return to if the experience is reliable, trustworthy, consistent and friction less is fundamental for the growth of e-commerce. We believe at BTI one of a small handful of niche e-commerce technology platform developing exceptional solution to provide and growing e-commerce in Africa. we have put forward solution for most of the inherent problem and inspire towards a common goal.
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All it’s waiting for is a critical mass of interested businesses to take the online channel seriously and give it the focus and the attention it deserves.
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by Yilak Kidane | Feb 19, 2019 |