Social Commerce & B2B e-Commerce are Driving Online Retail in Africa - Tabbing Takes 05
Social Commerce & B2B e-Commerce startups are the new growth levers for retail in aAfrica.
Welcome to another issue of Tabbing Takes. A series that looks into the most interesting trends in Africa's digital economy, culture and tech.
There is a lot going on in the African retail space, this week I tackle how social commerce and B2B e-commerce is at the forefront of Africa’s retail digitisation efforts.
Let’s dig in!
Retail revenue is a good indicator of the pulse of an economy and its projected path toward expansion or contraction.
Products offer no value to consumers until they can be acquired and used by these consumers. And retailers are the main conduit through which consumers acquire products.
Retailers acquire products in different sizes and quantities from brands and ensure that they stock them for when the consumers need them.
This is how consumer spending is able to drive much of the economy.
Retailers are a vital link between producers and end consumers. They provide useful information across the supply chain. By informing and educating customers about product features and benefits. While providing feedback about consumer requirements to the manufacturers and wholesalers.
Africa’s retail scene is a fragmented ecosystem dominated by informal retailers (small shops owners). These small shops are the go-to for a lot of Africans looking to solve their everyday product needs.
Modern trade (mall culture or formal retail) doesn’t have a big footprint in Africa yet (except in SA). So consumer spending in Africa is heavily concentrated in the informal sector - roadside stalls shops, & local markets. Making informal retail very much the stock of trade and retail on the continent.
Meanwhile, there is an ongoing shift to formalize informal retail in Africa by improving modern trade (mall culture) and digitizing the informal retail sector.
Africa's informal retail is powered by traditional trade; a distribution network of micro-retailers, dealers, stockists, wholesalers, and distributors - serving local customer demand.
So there’s a lot of MSME intra-African money movement and trade that’s happening. And they're mostly happening offline and in cash transactions, despite half a billion people owning smartphones on the continent.
As stakeholders drive the continent's digitisation transformation through infrastructural projects (high-speed internet) and digital literacy programmes, it is important that there's more focus on bringing Africa's enormous informal retail ecosystem online.
This is already happening at a growing pace as African startups are starting to make headway in their mission to connect African informal retail businesses to the digital economy.
Africa's online retail revenue is pegged at around $20 billion dollars annually which is just 2.14% of global online retail revenue. In 2019, only 10 African countries were responsible for 94% of all online businesses in Africa. This is evidence that a massive e-commerce opportunity exists on the continent.
Also while it might seem that e-commerce in Africa (selling via online stores) is on a slow upward trajectory, lagging behind the rest of the world, there is an e-commerce narrative happening in Africa that gets overlooked: Social commerce.
While e-commerce is an over-arching term for selling online, social commerce is different from e-commerce in the sense that e-commerce traditionally represents selling products and services online (traditionally through an online store or website).
On the other hand, social commerce involves selling on social media with customers making purchases without having to leave the social media apps at all. The entire shopping experience, from product discovery to checkout, takes place on the social app.
Which begs the question: Is social media the new shopping mall?
The bulk of online sales in Africa tend to happen outside the usual e-commerce channels (online stores). They are happening via social media sites, on business pages and in DMs. African local retailers are engaging in social commerce to sell online, especially Instagram.
With Facebook, Instagram, Tik-Tok, Snapchat, and Pinterest all launching shopping tabs for product discovery and in-app purchases. Social commerce will continue to blossom and accelerate the rate of online selling in Africa as long as people continue to spend more time online on these social networks.
Nevertheless, Africa's e-commerce potential remains largely untapped and the big B2C e-commerce companies like Jumia and co seem like they have a really long way to go as inadequate infrastructure and low consumer spending power continues to be an obstacle in effectively operating a B2C e-commerce model.
e-commerce (B2C) solves a fundamental problem for consumers– finding what you want, doing it much faster, getting more choices and best pricing online.
While the B2B (business-to-business) e-commerce model which focuses on local retailers, seems like a more worthwhile problem to solve, and a roundabout solution for serving last mile consumers.
It’s probably why some African B2C e-commerce companies are pivoting to a B2B model.
90% of sales in Sub-Saharan Africa happen through informal retailers, so it makes sense for companies to solve for levels higher than the consumers - the thousands of retailers; than for millions of consumers with relatively low-income power and at a much higher cost.
Besides these consumers already have longstanding relationships with these retailers anyway.
While B2C e-commerce companies (the Jumia's) give retailers the ability to own an online shop and tap into aggregated demand, these retailers barely have any control over their online shops; as these shops have very limited functionality.
B2C e-commerce solves one part of the puzzle.
African retailers need more than just online shops. They need dedicated solutions that cater to their special needs. And B2B e-commerce startups are rising to the occasion as they transform the retail experience on the continent.
They're building a digital layer on top of Africa's offline retail network.
They're digitizing the informal retail sector and opening new retail and payment opportunities to businesses and consumers in Africa.
From financial services to inventory management and fulfilment, Africa's retail sector is seeing more and more local tech solutions tackling its issues.
By connecting local retailers to the digital economy, B2B startups are fixing Africa inefficient supply chains.
The recent fundraising activities in the African B2B e-commerce marketplace reflect the importance of informal retailers in the region.
For example, Twiga Foods recently raised $50m to expand its operations in Africa. The 7-year old company is using tech to build food and retail supply chains in Africa by connecting vendors and outlets with farmers as well as connecting FMCGs and manufacturers with retailers.
In Africa, e-commerce is especially hard because of the unique challenges that are common across African countries, as well as the different local understanding required to adapt to the different e-commerce business models.
If Africa is to fully tap into its e-commerce potential, it is important that its informal retailers are connected to the digital world since last-mile distribution goes through them.
Digitizing informal retail in Africa means that retailing becomes increasingly convenient, increasingly profitable, and increasingly embedded in the daily lives of mass-market Africans.
As more African consumers come online and the continent’s informal retail network becomes connected to the digital economy, you can expect an exponential surge in online retail activity in Africa as B2B e-commerce startups improve the retail experience in Africa through using digital solutions.
We are increasingly moving toward a world where Africa's informal retailers aren't simply intermediaries that buy from suppliers and sell to customers.
The African commerce ecosystems is heading to a place where more value is created and delivered to customers and retailers alike, where opportunities abound as the continent adopt different e-commerce models as mobile money and mobile-everything rips through the Africa.
👁👁 Kept Tabs on
Dubuy, a business-to-business (B2B) e-commerce platform from UAE just launched in its third market in East Africa - Kenya after setting up in Rwanda & Ethiopia. DUbuy is looking to launch across more countries on the continent in the future.
A rare sight for an African startup acquiring another startup outside Africa as Helium Health acquires UAE based Meddy.
Multichoice (DStv) is considering offering smaller channel bundles.
MFS Africa continues its giant growth as it raises $100m to continue its expansion across Africa
Meta launched Facebook Business Coach; a free-to-use, low-cost educational chatbot for SMB owners in South Africa, Nigeria, Kenya, and other English-speaking African countries to learn more about how to expand their business online with Facebook, Instagram, and WhatsApp.
Kenyan-based AI startup, Sama raised $70 million to develop the first end-to-end AI platform that allows teams to manage the entire AI lifecycle from beginning to end.
Shamiri Institute, a Kenyan mental health startup, raised $1 million to extend its programs and reach more African youth
Egyptian Food delivery Startup, Breadfast, raises $26 million Series A funding round as it seeks to enter Sub-Saharan African markets.
From NFTs to DeFi - Nestcoin wants to simplify all things crypto to boost adoption in Africa.
Till Next time -