Africa’s retail landscape has grown over the past decade as the demands of consumers become more sophisticated offering an opportunity for retailers to expand. With at least one billion consumers, it is easy to see why there is potential for further growth in retail going forward. According to Mckinsey & Consulting, it is expected that by the year 2020 the consumer industry could grow by more than $400 million.
The spending power of some Africans has grown and this has certainly increased their appetite for luxury and trendy customised goods. With more than 50% of the African population aged under the age of 25 who are “netizens”, (constantly hooked to the internet) in search of the latest trends in technology and fashion it is easy to see why retailers are now feverishly working to tap into online retailing. It is now being focused by futurists that the consumer economy in Africa will be driven by young consumers.
The arrival of low cost smartphones is changing the way people are shopping and paying for services. Smartphones now serve as wallets and entertainment hubs. In 2007 two countries in Africa apparently had a mobile money service, a huge contrast to the current situation where at least 41 countries are reported to have mobile money services. As the volume of mobile payments across Africa continues to grow, this will open up more opportunities for those trading on the internet to reach more consumer.
Online shopping communities that are being referred to as Online Malls now offer trading space online for businesses and startups that do not own physical stores. Consumers are also being given the opportunity to connect with sellers through Online malls within the countries they live in. New ways of marketing have developed over the past few years with many budding entrepreneurs using social media networking sites to connect with potential consumers.
A good number of online businesses such as Mall For Africa founded by two nigerians in 2011 have racked in substantial sums with sales estimated at about $17 million in 2014 as reported recently by Forbes magazine. They have been able to partner with U.S retailers such Bloomingdales and Best Buy to cater for the growing middle class.
Some much smaller startups are cashing in on growing e-commerce. In Zambia, sites such as ShopZed.com are providing a convinent way for consumers to purchase groceries which are delivered to their door step. They however, face challenges because of a lack of reliable methods of payment online. Only consumers with Visa debit cards are able to shop online because of a lack of reliable online payment services. While this may be the case for some countries in Africa, the development of online payment systems will no doubt attract consumers over the next few years.
The growth of e-commerce will undoubtedly compensate for many other infrastructure challenges that consumers face such as bad roads and transportation. As mobile money slowly becomes part of the “core economic infrastructure”. There is however, skepticism that we may not see real growth in e-commerce because of some consumers being weary of online fraud particularly in countries like Nigeria which surprisingly is leading the way in the growth of e-commerce.
According to Ventures Africa, 65% of the Nigeria’s 50 million internet users have at one time shopped online. A study carried out by a global market research company Ipsos revealed recently that there at least 89% of internet users are potential online shoppers. The drivers of growth are said to be efficient delivery of goods which will encourage more consumers to shop online.
There has been the concern of logistical problems particularly in relation to the delivery of goods sold on the internet by some e-commerce businesses in certain regions of the continent. Some business analysts are of the view that the lack of reliable postal services and concerns about online fraud will be an impediment to the growth of e-commerce in Africa. A good number of online retailers are however, finding ways to circumvent some of the challenges and are known to offer cash on delivery services as a way of reassuring customers.
Africa’s tech space is providing a platform for entrepreneurs who would not be able to get their businesses off the ground in the physical world. Big retailers are also now innovating to keep up with the tech trends or watch their businesses come to a screeching halt. There are numerous case studies of small businesses that have actually been able to transition from relying on sales and advertising on social media to owning a physical shop and employing more people as well as make profits as their businesses expand. They however, continue to use social media to engage potential customers.
Combining traditional and modern ways of reaching consumers has certainly enhanced the shopping experience for African consumers.
Economists see the growth of the consumer market as a positive for the economy however, many challenges still exist because of inequality and low wages for those in the low income bracket. Companies in the retail sector are working towards being inclusive by packaging their products to suit those at the bottom of the pyramid. This means adapting product size and price to enable brand Penetration as well as loyalty among consumers in the low income bracket. Small and major brands are realising that localising their products is the best way to attracted the attention of African consumers as the continent continues to be upwardly mobile.