Surprisingly enough, there are some places where Amazon doesn’t flow.
Such as across much of Africa. While the giant global retailer covers large parts of the world, it has registered barely a ripple in the world’s second biggest and second most populous continent.
At first glance, that doesn’t make sense.
Africa has a burgeoning middle class, which can only grow as economic development gains traction in ever more countries across the continent. Meanwhile, telecoms and internet penetration is growing apace.
That represents a significant opportunity for upstart internet retailers – especially given that the world’s online behemoths haven’t taken a commanding position in the market.
“Contrary to popular belief, African consumers want quality products and not necessarily cheaper ones,” says Rania Belkahia, co-founder of Afrimarket, a French company founded five years ago that provides a wide range of quality products and value-added services in five Western African countries. The start-up has raised EUR20 million from a variety of investors.
“They want products that are guaranteed. They want to be able to receive a service that is up to Western standards. Yet today, it’s very difficult to provide quality services, bearing in mind what’s on offer in their countries and the very poor local infrastructure.
Leaping the infrastructure hurdle
The trick to circumnavigating poor infrastructure in order to deliver the sort of goods and services middle classes everywhere demand has been to capitalise on existing technology and use local knowledge.
“We ensure end-to-end delivery, from our fulfillment centre to the last mile,” says Belkahia. “To achieve that, we built our own delivery platform, with our delivery staff, a technical software adapted to African lack of infrastructure, and our own fleet.”
Afrimarket started off focusing on expatriates wanting to send money and goods back home. Traditional intermediaries are notoriously expensive: for African countries, fees and spreads often absorb more than 10 per cent of the remitted funds. At the same time, expats often worry that money sent to relatives may not be used for the intended purposes – items such as food, medicine or tuition fees.
To solve that problem Afrimarket launched a system of vouchers sent to a specific supplier where the recipient could collect the items that the sender wanted to pay for. Migrant workers could log into their Afrimarket account, enter the amount they wanted to remit, choose the supplier to receive the funds, specify the recipient’s mobile number for notifying them, and click send. Cutting out the money transfer agents and other middlemen in favour of mobile connections drove down the cost of sending remittances.
But as local retail demand became apparent, Afrimarket shifted the focus of its operations. Now 80 per cent of its business is generated within Africa, with sales growing at some 20 per cent a month.
“We started building (…) a curated marketplace. We don’t let suppliers choose the products they put on our shelves: we choose what goes on them, which ensures that we offer a quality service that adds value and has set us apart from other e-commerce services,” Belkahia said. “The value we bring to our clients we also bring to international brands… We help brands understand the market, adapt their product and marketing” to African consumers’ aspirations.
Tapping potential
The company’s success testifies to Africa’s untapped e-commerce potential.
Rapid growth of mobile telecoms and ever cheaper solar cells are helping to underpin the expansion of internet retailing across the continent. Mobile phone penetration in sub-Saharan Africa was 44 per cent in 2017 from just 25 per cent at the start of the decade. That proportion is expected to rise to 52 per cent by 2025, at which point Africans could be owning 690 million smartphones for a population of around 1.5 billion.
And trends of recent decades suggest Africa’s middle class will grow apace. During the past decade the Ivory Coast’s economy has grown 5.8 per cent a year, Ghana’s by 7.2 per cent and other west African neighbours by 4 to 5 per cent a year. True, some of that’s down to population growth. But GDP per capita has also been expanding. In dollar terms, the average Ghanaian and Nigerian last year generated four times as much output as in 2000. In Senegal and the Ivory Coast, GDP per capital doubled.
Across most of the continent, youth literacy is above 70 per cent – it’s worth bearing in mind that only 35 per cent of people in the world were literate as recently as 1950 – and school enrolment is above 80 per cent. Rates of extreme poverty have fallen appreciably – down to around 40 per cent from 58 per cent of the sub-Saharan population over the past quarter century.
E-commerce should pick up as ever more Africans gain access to technology that leaps over the poor quality infrastructure that has so often stymied growth in the past.
Typically, as people become richer and better educated, they develop the political clout to demand better governance, better social services like education, better infrastructure and rule of law. It’s a virtuous circle. And as countries grow, so too does their middle class. Which further opens prospects for businesses like Afrimarket.
