Exploring Africa's e-commerce market, the Potentials, challenges, and the Phore Blockchain solution part 1
Africa is one of the fastest-growing consumer markets in the world. Household consumption has increased even faster than its gross domestic product (GDP) in recent years — and that average annual GDP growth has consistently outpaced the global average. In light of the increasing affluence, population growth, urbanization rates, and rapid spread of access to the internet and mobile phones on the continent, Africa’s emerging economies present exciting opportunities for expansion in retail and distribution.
Home to 54 countries with a joint population of over 1.2 billion people, consumer expenditure on the continent has grown at a compound annual rate of 3.9% since 2010, spending across the continent amounted to US$1.4 trillion in 2015, with three countries- South Africa, Nigeria, and Egypt contributing over 50% to that total, Consumer spending in Africa is projected to reach US$2.1 trillion by 2025 and US$2.5 trillion by 2030. Also, in 2030, if the Continental Free Trade Area (CFTA) is properly implemented, a single continental market for goods and services will be operational, offering corporations different points of entry to the continent and a potential market of 1.7 billion people.
By 2030, the largest consumer markets will include Nigeria, Egypt, and South Africa. There will also be lucrative opportunities in Algeria, Angola, Ethiopia, Ghana, Kenya, Morocco, Sudan, Tunisia, and Tanzania, among other African countries. Within Africa, the largest consumer market in terms of the total volume is Nigeria, worth roughly US$370 billion in 2013, followed by Egypt, South Africa, Algeria, Angola, Morocco, Sudan, and Kenya. Increased spending among households in Nigeria will likely amount to nearly US$200 billion between 2015 and 2025, or 30% of Africa’s overall consumption growth over this period.
The rapid diffusion of ICTs in Africa over the past decade has facilitated access to consumers in new and varied ways. Africa is currently the fastest-growing mobile telecom market in the world. Averaging roughly a 30% increase in mobile phone connections per year since 2000, and recently overtaking Latin America to become the world’s second-largest mobile market behind Asia.
The African e-commerce market was estimated at US$ 50 billion in 2018, from just US$8 billion in 2013. This presents a unique opportunity for a market that shows a lot of potentials for investment. The growth of e-commerce is a unique opportunity to open access to international markets for small and medium-sized enterprises (SMEs) in developing countries.
In 2018, an estimated 1.8 billion people worldwide purchased goods online. During the same year, global e-retail sales amounted to US$2.8 trillion and projections show a growth of up to US$4.9 trillion by 2021.
E-commerce in developed countries is estimated at over US$15 trillion for annual business-to-business (B2B) transactions and well over US$1 trillion for annual business-to-consumer (B2C) trade with China and the US leading the global market.
However, this is not the case in many developing countries where the use of e-commerce remains low. The current share of consumer e-commerce by African enterprises, for example, is below 2%, although it’s enormous potentials, the Africa e-commerce market still faces several challenges that need to be overcome for it to fully meet up to its full potentials. Most of these challenges range from delivery logistics and supply chain to high internet costs in some parts of the continent.
Although these are minor challenges that have seen some level of improvement over the years in form of innovations such as the Rwandan startup Zipline, which uses its fleet of commercial delivery drones to deliver blood to remote health centers across the country on SMS requests. This greatly helped in overcoming the dependence on the internet for deliveries and the country’s hilly terrain, which are mostly inaccessible to delivery vehicles, the company currently working towards extending their services to more commercial applications including e-commerce deliveries.
Another innovative solution to logistics problems is the crowdsourced delivery company MAX (Metro Africa Xpress). A Nigerian startup that provides delivery services using independent and crowdsourced drivers to make deliveries all over the country. Solutions such as these are slowly been replicated across the continent, making e-commerce a lot easier, efficient and cost-effective.
However, the African e-commerce market is slowly evolving in most parts of the continent, especially in countries like Nigeria, where most merchants are now adopting a “social-commerce” approach, which is in definitive terms, a subset of e-commerce involving social media that supports social interactions and direct buying or selling of products online. Most merchants prefer to sell their products on social media, thereby boycotting major retail companies that have dominated the market over the years. This move has helped merchants avoid paying high product listing fees to these retail companies and also maximize their profits.
Most Shoppers, on the other hand, prefer this approach as they feel more assured on a merchant’s authenticity and product quality by having peer-to-peer (P2P) interactions with the merchant online before going ahead to make a purchase or not. This latest trend may be as a result of another major underlining issue facing the e-commerce sector in Africa which is trust among online shoppers. Social-commerce, of course, comes with its risks as most of the time, there isn’t a guaranteed way to mitigate scam, a fraudulent merchant could easily market fake or non-existing merchandise on these social platforms in a bid to scam non-suspecting shoppers and neither will these social platforms provide any fail-safe mechanism for such eventuality.
As traditional e-commerce relies majorly on third-party intermediaries and systems which are costly, slow and prone to error. The Phore Blockchain technology offers a decentralized solution set to empower consumers with a more transparent and secure platform to trade, further creating an ecosystem that links buyers directly to sellers, facilitating private, faster and secured transactions.
Blockchain is a distributed ledger that allows any digital asset to be stored, shared and acted upon manually or automatically. This fits naturally with e-commerce since the blockchain was designed to store transactional data although not restricted to financial data alone, the blockchain can store any distinct action that requires an immutable record, including actions related to payments and order fulfillment.
Blockchain technology such as the Phore Blockchain is set to offer solutions to several challenges faced by conventional e-commerce not just in Africa but all over the world. With our decentralized Marketplace built to facilitate efficient and secure peer-to-peer e-commerce in a fast, secure and completely private way.
Phore blockchain is geared towards providing a real-world application to enable private commerce and new privacy-enabled business models globally.
We delve into this fully in the next part of this article “Exploring Africa e-commerce market, the Potentials, challenges and the Phore Blockchain solution part 2”, where we’d discuss in detail how the phore blockchain technology is set to revolutionize the e-commerce market not just in Africa but all over the world.
Learn more about the Phore blockchain @ www.phore.io
Follow us on twitter @ twitter.com/AfricaPhore.
