In South Africa, credit cards are used by only 16.5 percent of the population according to 2008 figures and no African country comes close to 1 percent of total retail spend spent online.
The magic figure which constitutes the tipping point for digital retail growth remains a long way out of reach – with ecommerce constituting 0.4 percent of the South African retail market. In countries such as Egypt and Nigeria, the figure stands at an unremarkable 0.01 percent.
It is no wonder, then, that the ecommerce market in Africa has failed to bloom. Looking at these numbers, many international ecommerce plays have shifted investment in the African market five to 10 years down the line.
But where others fear to tread, Oliver Rippel, the ecommerce chief executive at Africa & Middle East at MIH, sees opportunity and first-mover advantage. Speaking at the 2011 NetProphet conference on May 12 in Cape Town, Rippel said he saw a number of positive macro-economic indicators warranting investment in the African online retail market.
For one, the continent is experiencing real GDP growth at a time that many developed economies are experiencing varying levels of stagnation and contraction. This translates into a growing middle class – now estimated at 350 million Africans – up from 135 million in people in 1990 and 200 million in 2000.
Rippel said high mobile phone penetration and the shift in focus to data by the cell service providers is another reason market requires investment by early movers.
South Africa stands at 92.2 phones per 100 people and the figures are similar in a number of other African markets. Coupled with new undersea broadband cables now connecting to Africa, it becomes clear the region is bound to see a more digitally-familiar audience migrating to ecommerce.
Growth in the market will be spurred on by entrepreneurs finding it easier to do business in Africa, helping stimulate innovation and new ventures.
Rippel says success in the digital retail space depends on a number of key factors, including embracing mobile technologies, leveraging offline environments, an understanding that in Africa cash remains king and building a trust relationship with consumers.
Credit card penetration remains low on the continent with 95 percent of people relying on cash-based transactions. This has lead to the success of M-PESA in the Kenyan market enabling people to transfer cash from the city to relatives in the countryside.
People now use M-PESA accounts for real world commerce and it is starting to translate into ecommerce as well with Vodacom and Nedbank recently announcing the introduction of M-PESA into the South African market.
Post published in: News