A growing African middle class and young population are creating a demand for products that store-based retail cannot meet due to a lack of shopping malls and gridlocked cities. As a result, e-commerce is on the rise on the continent and its future looks promising.
This is according to Bernadette Kissane, a London-based analyst at international market intelligence firm Euromonitor. She says development has been most notable in Nigeria, where a surge in telecommunications investment and smartphone purchases has fuelled the growth of the Internet.
“Furthermore, Nigeria boasts the largest online market for apparel and footwear in the region, which is expected to grow from US$104-million in 2014 to US$1,08-billion in 2019, mainly due to the dynamic development of trusted [online retailers] Jumia and Konga,” Kissane notes.
She adds that Jumia and Konga are leading the way for Internet retailing in Nigeria, with 36% and 23% market share respectively. Both businesses offer a range of products, from books to beauty, and include a number of local and international fashion brands such as Topshop, H&M and Vero Moda. Jumia, which now operates in eight African countries, found success in offering fast delivery services and establishing trust with consumers by allowing payment on delivery.
“A number of start-up [online] retailers have emerged in response to the growth witnessed in Nigeria,” Kissane says. “For example, ‘Webmallng.com’ and ‘Buyam.com.ng’, act as online malls, allowing merchants to set up shop in one place. Although this creates a vast product offering for consumers, it appears to cause confusion regarding the management of the site, as ‘Buyam.com.ng’ continued to display Christmas promotions on its homepage in February.”
Meanwhile, South Africa, the region’s largest apparel market overall, is expected to record a much slower pace of growth in Internet retailing, rising from US$50-million in 2014 to US$73-million in 2019. This highlights that the consumer preference in SA is to use the Internet as a research tool, but purchase items in store as a result of the mature formal retail environment.
“E-tailing in sub-Saharan African is currently dominated by local businesses.” Kissane observes. ‘Spree.co.za’ is South Africa’s primary online player with a 10% market share. The website has a similar aesthetic to ASOS (a successful British online fashion and beauty store), providing editorial content and offering an array of brands including Levi’s, Guess and Nike. Mr Price, the leading South African retail chain, has also acknowledged e-commerce as an essential distribution channel, having launched its transactional website in 2012.”
Looking at online retailing in general in sub-Saharan Africa, Euromonitor expects that it will follow the same pattern as in other markets. As more consumers gain access to the Internet and become comfortable shopping online, growth will be driven by competitive pricing, providing opportunities for fast-fashion brands appealing to the younger demographic.
“Clearly, e-tailing is still in its infancy. The weak transport infrastructure and lack of consumer confidence will continue to restrain growth,” Kissane says. “Further still, in a region where many consumers do not have a credit card and in some cases no formal address, retailers are faced with a magnitude of logistical problems they need to overcome.”
She continues: “Although forecast growth is promising, in order to see a return on investment, strategy will need to be long term and platforms such as Spree, Konga and Jumia, provide a route to market that minimises risks and allows brands to build customer relationships.”
South Africa's burgeoning e-commerce era means that consumers are no longer shopping entirely online or offline. Rather, they taking a blended approach and using whatever channel best suits their needs.
This is one of the key findings released last week as part of the Nielsen Future of Grocery Report. It is based on research that polled 30 000 online respondents in 60 countries to understand how digital technology will shape the retail landscape of the future.
In a move that surprised the South African e-commerce industry, two of its major players have announced a merger in the face of increasing competition from abroad, as well as the growing online operations of traditional bricks-and-mortar stores.
Kalahari.com, one of the best-known names in the local industry, is joining forces with the newer and more aggressive Takealot.com, subject to approval by South Africa’s competition regulator. Both platforms offer a wide selection of products and categories, and are in competition with international e-commerce sites such as Amazon and Alibaba. They are also up against specialist local e-commerce sites like Groupon (discount products and services) and Yuppiechef (kitchen products and services), as well the online operations of retailers such as Exclusive Books.
E-commerce is big business and getting bigger every day, with estimates that business-to-consumer (B2C) e-commerce sales worldwide will reach US$1,5-trillion in 2014, increasing by nearly 20% over 2013.
But, says a study by the global Nielsen research company entitled ‘e-Commerce, Evolution or Revolution in the Fast-Moving Consumer Goods World’ not all categories are created equal. The most popular e-commerce categories, not surprisingly, are durable items and entertainment-related products. The study finds that almost half of global respondents intend to purchase clothing or make airline or hotel reservations using an online device in the next six months. Other categories growing in prominence when it comes to online shopping include e-books, event tickets, sporting goods and toys. Spending intentions for each have risen at double-digit, or near double-digit, percentage rates since 2011.
“The online market for buying groceries and other consumable products is comparatively smaller, but is starting to show promise,” say the researchers. “While durables are the starting point of adoption, consumables are attractive due to the frequency of purchase. Aside from online purchasing, digital is an increasingly important research and engagement platform.”
Consumable categories are not likely reach the same level of online prominence as non-consumable categories due to the hands-on buying nature and perishability of the products, but the market is wide open and an eager audience is at the ready.
The study, says Nielsen, “provides clarity about global consumers’ buying intentions for both consumable and non-consumable categories in the growing e-commerce landscape, which answers important questions for brand marketers and retailers on who is buying what and how they can achieve greater success”.
Adds John Burbank, President of Strategic Initiatives at the company: “The lightning-fast pace of change in the digital landscape has ushered in a consumer mindset that is both adventurous and exploratory when it comes to online shopping. Consumers everywhere want a good product at a good price, and the seemingly limitless options available in a virtual environment provide new opportunities for both merchants and consumers. The market for fast-moving consumer goods is no exception.”
The study, released in late August, surveyed 30 000 online consumers in 60 countries. One of its limitations, though, is that it provides a perspective only on the habits of existing Internet users, not total populations.
A key question the researchers attempted to answer is whether consumers are using the Internet to research products with the intention of making a purchase online, or if they are taking their new-found knowledge back to brick-and-mortar retail locations to make the transaction. The answer seems to largely depend on the product.
When it comes to shopping for clothes, event tickets, books and toys – or making reservations for tours and hotels – consumers typically have something specific in mind, the study notes. For these transactions, there is mostly a one-to-one correlation between online searching and shopping – those who browse online also buy online. These closely linked browsing/buying items are also among those with the highest respondent purchase intention rates, which range between 35% and 46%.
Consumable products, on the other hand, have lower online browse/buy intention rates than non-consumable products, yet they have just as strong browse-to-buy correlations. For example, for cosmetics, 33% of global respondents say they browse and 31% say they buy: nearly a one-to-one correlation. Similarly, about one-third of global respondents say they browse and buy personal care products (31% vs 29%) and groceries (30% vs 27%). About one-fourth browse and buy pet products (24% vs 21%) and baby supplies (23% vs 20%), and roughly one-fifth browse/buy flowers (20% vs 18%) and alcoholic drinks (20% vs 17%).
“Strong online browse-to-buy correlation rates for fast-moving consumer goods translates to loyal repeat customers for these categories,” says Burbank. “While these categories are still in the early stages of online adoption, these correlations signal great news for retailers. Now is the time to create omni-channel experiences for consumers who are actively using both digital and physical platforms to research and purchase, as increasingly they don’t make a distinction between the two.”
According to the study, emerging markets are racing to embrace e-commerce. The appetite for online browsing is strongest in the largely developing regions of Latin America and Asia-Pacific, with both eclipsing the global average for all 22 categories in the study. But the biggest difference is that Latin Americans browse and Asia-Pacific respondents buy.
While online browsing rates are highest in Latin America, online buying rates for the region are the lowest for just about every category in the study. Conversely, online buying rates in Asia-Pacific are the highest of any region – so high that buying rates exceed browsing rates for more than half (14) of the categories surveyed.
However, in the Middle East/Africa region, e-commerce remains less developed. “Lower-than-average online percentages can largely be attributed to opportunity, or lack thereof,” says Nielsen. “In a region where disposable income is low and shopping for daily needs is the norm, online shopping is not a priority. But that will change as more consumers continue to move up the socio-economic ladder.”