Exploring the Future of Social Commerce in Sub-Saharan Africa

In recent years, social commerce has been gaining significant traction across the globe. In particular, in sub-Saharan Africa, where informal sellers and marketplaces play a significant role in the economy, social commerce is growing substantially and is expected to grow by 36.8% annually, reaching US$41.92 billion by 2028. In fact, 90% of retail in this region reportedly takes place through informal channels, with at least 32% of e-commerce transactions occurring on platforms like Facebook, WhatsApp, and Instagram.

Audrey Djiya, a former Venture for Africa fellow and recent Stanford University GSB graduate, has been on the ground in sub-Saharan Africa, delving deep into this world of social commerce. Her mission? To assess its impact on local informal sellers, chart its growth potential, and explore the technology that’s already shaping the landscape.

We had a conversation with Audrey to shed light on what sets Sub-Saharan Africa apart as a hotbed for social commerce, as well as the challenges and opportunities that lie ahead. She is also actively working on launching her venture, aimed at addressing the industry’s identified problems and gaps.

The Motivation Behind the Research

While in Dakar, Senegal, Audrey was on the hunt for a dress and a hairstyling appointment for a wedding. What transpired was an unexpected journey into the world of social commerce.

After posting her request, instead of traditional recommendations, she received direct messages on Instagram from potential sellers and stylists.

“The way e-commerce operates in Africa, through social media platforms like Instagram and WhatsApp, caught my attention…I realized that it was very different from what I was familiar with in the US,” Audrey shared. It offered a key insight into seller and consumer behaviours in African markets that changed the way she thought about e-commerce.

This experience inspired her to delve deeper into the potential of social commerce in the region and decide whether she wanted to explore the possibility of establishing a business in this field. Audrey explains, “Africa has a young, tech-savvy population and operates with a mostly informal economy. Social commerce presented itself as the perfect mix between full e-commerce and informal, in-person retail.” As an Impact Immersion Design fellow at Stanford, Audrey had the chance to conduct firsthand research in Nigeria and Senegal.

Key Factors and Challenges in Social Commerce in Africa

According to the Africa & Middle East Social Commerce Market Intelligence Databook 2023, the market value of social commerce in Africa and the Middle East is around $9 billion and is expected to record a Compound Annual Growth Rate (CAGR) of 33.4% over the next 5 years.

Several key factors contribute to this substantial growth. With 1.2 billion consumers today and an expected increase to 1.7 billion by 2030, the sheer size of the population provides a substantial market opportunity. As well, the economic landscape is beginning to evolve.

While there has traditionally been a significant disparity in disposable income between consumers in rural vs urban areas, this gap is shrinking in Sub-Saharan Africa. In 2016, rural disposable income per capita accounted for 41% of urban income, and this figure has increased to 43% in 2021. This is expected to reach an estimated 67% of urban per capita disposable income by 2040, indicating higher spending potential for a larger portion of the population.

For social commerce, this represents an expanding market with growing purchasing power.

We are currently observing a notable surge in consumer spending, giving rise to an increased demand for goods and services. Technology is a key driver in this trend, with the widespread adoption of the internet and smartphones granting individuals access to online commerce platforms and facilitating the broader use of digital payment methods.

The influence of social media on businesses cannot be understated, particularly among a substantial number of Small and Medium Enterprises (SMEs) leveraging these platforms for their operations. This, in turn, has significantly contributed to the flourishing landscape of social commerce.

Amidst the promising prospects, a myriad of challenges presents hurdles for both social sellers and entrepreneurs seeking to bolster this burgeoning ecosystem. Audrey succinctly encapsulates these obstacles, emphasizing, “Connectivity is not only expensive but also exhibits occasional instability and poor reliability. Despite widespread smartphone accessibility, broadband speeds often lag, and the prevalence of cash transactions persists, partially rooted in trust issues with traditional banking and digital financial services.”

Another significant challenge lies in the complexity and inefficiency of supply chains, particularly as many social sellers depend on imported goods from outside the region. These obstacles highlight the intricate dynamics that influence the changing landscape of social commerce.

Distinctive Behaviors and Preferences of African Social Sellers

On the continent, various types of entrepreneurs can be considered social sellers; this diversity in seller profiles sets Sub-Saharan Africa apart. “In other markets, consumers go to e-commerce platforms mainly for the types of products you might find on Amazon, for example, whereas brick and mortar or delivery apps might be used to make other purchases. In African markets, even a cake baker can be a social seller because they’re operating their business primarily on social media,” explains Audrey.

Payments also remain a challenge in many markets, despite significant investment in and innovation around the payments space in Africa. For social sellers, the payment process can often be idiosyncratic and can make logistics challenging. “In some markets, people pay with bank transfer or often with cash, which is also unique to the continent,” Audrey says. Payment innovations like mobile money, however, can enable easy and instant payments in parts of Africa including Kenya, Tanzania, Uganda and Ghana, enabling even those without a bank account to easily collect digital payments on the spot — often before fulfilling an order.

One of the most crucial behaviours Audrey delves into is trust and personal relationships. Due to the informal nature of these transactions and those selling, the development of personal relationships plays a significant role in establishing credibility, often necessitating extensive communication. “Trust is very crucial on the continent, and for social sellers, building trust might involve a lot of back and forth between the seller and their buyer through pictures, videos, phone calls, and answering messages,” says Audrey.

Empowering Social Sellers with Technology

“Technology and platforms have the potential to empower social sellers and contribute to their growth and efficiency,” emphasizes Audrey. They play a vital role in facilitating and empowering social sellers to thrive in the digital marketplace. “Entrepreneurs need to tackle challenges, from streamlining procurement to access to financing to AI-powered marketing support while keeping costs low,” says Audrey.

For most social sellers, the most important benefit innovative startups bring is their ability to reduce their costs. By streamlining and automating various aspects of their business operations, current technology and startup solutions can help sellers operate more efficiently and cost-effectively.

For instance, Wasoko allows retailers to order products from suppliers through its mobile application for same-day delivery, and it offers a buy now, pay later option for those who need working capital to order more goods.

Tendo meets the backend logistics, financing, and marketing needs of social commerce entrepreneurs to ease setup and operating costs whereas Sukhiba is a B2B conversational commerce tool that allows social sellers to operate via Meta’s messaging service, WhatsApp. “I think as long as the technology doesn’t disrupt or change their ways of doing business, but proves to make them more efficient and poised for growth, it can be helpful,” says Audrey. “I think the number one thing any social seller says is ‘I want to grow my business,’” she adds.

With the advent of digital marketing and technology, sellers are empowered to increase sales and growth more efficiently.

By creating and sharing compelling content, sellers extend their visibility to a broader audience. Advanced analytics provide data-driven sales insights, including customer behaviour and trends, aiding in procurement, inventory management, and sales decisions. Sellers can list their products easily, complete with descriptions, images, and pricing. Social commerce platforms offer various marketing tools, such as ad placement, sponsored posts, and promotional campaigns, to reach a larger audience. Order management tools allow sellers to track and manage orders, including status, payment confirmations, and shipping details, all from a centralized dashboard.

All these available solutions simplify these business processes, making it even easier for sellers, even those who aren’t tech-savvy, to harness the power of social commerce to increase sales and growth.

Concluding Thoughts

The rise of social commerce in sub-Saharan Africa presents a unique opportunity for sellers and consumers. With the increasing use of social media platforms like Instagram, WhatsApp, and Facebook, informal sellers are finding new avenues to reach customers. This shift towards social commerce is driven by factors such as the region’s large population, growing purchasing power, rising internet and smartphone usage, and a young and tech-savvy demographic.

However, challenges exist in this emerging market, including connectivity issues, limited access to digital payments, and complex supply chains. Technology and innovative startups are playing a crucial role in empowering social sellers and addressing these challenges.

Technology is assisting social sellers in operating more efficiently by simplifying procurement, offering financing options, and providing AI-powered marketing support. However, it is crucial to acknowledge the distinct behaviours and preferences of African social sellers to succeed in this market. This highlights the significance of factors such as establishing trust through personal relationships, navigating diverse payment methods, and adapting to different seller profiles.

Looking ahead, the future of social commerce in sub-Saharan Africa holds great promise. Entrepreneurs who embrace mobile-friendly platforms, expand into rural areas, and prioritize sustainability are well-positioned to unlock the vast potential of this growing market. In this context, social commerce goes beyond simple commercial transactions — it becomes a catalyst for economic growth, a supporter of local businesses, and a transformative force that reshapes trade dynamics in Africa.

In conclusion, sub-Saharan Africa is on the brink of a digital revolution, where social commerce serves not only as a way to buy and sell, but also as a tool for empowerment, growth, and redefining commerce in Africa.