Online shopping is gaining traction across Africa and other emerging markets as Internet penetration continues to rise.
African online consumer trends largely echo those of India, where, as mobile ownership and Internet penetration continue to rise, online groceries become more desirable. A 2014 US Department of Agriculture report reflecting on the increase in online grocery shopping in India notes that “the growth in India’s online retailing for food and groceries is a function of the rise in total Internet users from 120-million to 213-million in the past year, as well as a fall in mobile handset prices and a rise in smartphone penetration”.
Talking to daily newspaper ‘The Economic Times’, Amit Bhartiya, advisor at Mumbai-based e-commerce grocery website LocalBanya, cautioned, however, that “offline players going online cannot make a mark if they do not offer competitive pricing and value”.
Indeed, competition is the name of the game, with smaller players in the online grocery market competing against the big guns such as online stalwart Amazon India, which recently introduced general online store KiranaNow, an express delivery platform in partnership with neighbourhood stores. ‘Knowledge@Wharton’, the online journal of the Wharton business school of the University of Pennsylvania in the US, recently noted this development in an article entitled Online Groceries in India: Will Consumers Bite? (7 May 2015).
Launch in March this year, the KiranaNow pilot project’s stated aim is to deliver goods purchased online within two to four hours. An Amazon India spokesman told the ‘India Today’ news website at the time: “Our vision is to enable our customers to buy anything and everything they want online, anytime and anywhere – at low prices and a convenient, fast and reliable delivery experience.”
While India is forging ahead with online buying, according to the recently released Nielsen ‘Future of Grocery Report’, a blended approach to online retail is advisable for the African market. Nielsen Africa Retailer Services and E-Commerce MD, Harsh Sarda, noted: “The most successful modern and traditional trade retailers and manufacturers will be those at the intersection of the physical and virtual worlds, leveraging technology to satisfy shoppers how, when and where they want to shop.”
He continued: “A key aspect of meeting these needs is in-store digital enablement options that bring the ease, convenience and personalisation of online to brick-and-mortar stores. Instituting digital strategies into the in-store experience is, therefore, not just a nice-to-have for key consumer markets – these options can increase dwell time, engagement levels, basket size and shopper satisfaction.”
This could be in the form of a retailer or loyalty app, or Wi-Fi that enables shoppers to opt in to receive information on special offers while they’re shopping. While this is currently a more prevalent strategy in South Africa, increasing mobile penetration across Africa could potential broaden the appeal of a blended physical and digital shopping experience where convenience and value take centre stage.
According to a 2014 MasterCard ‘Online Shopping Behaviour Study’, published in conjunction with research organisation World Wide Worx, online grocery shopping in South Africa displays a steady increase with local e-commerce sites becoming the preferred option. Only 24% of local online spend was on foreign shopping sites, down from 27% the previous year and 33% in 2012.
“The products that consumers are buying suggest that online shopping is becoming increasingly mainstream, which also bodes well for local retailers,” Arthur Goldstuck, MD of World Wide Worx, told business website ‘BusinessTech’. “No longer is online shopping confined to books and DVDs, plane tickets and apps.”
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.