The African retail revolution is here. Are you on board?

The African population is expected to reach 2.5 billion by 2050. A staggering 53 percent of income earners in Africa are between 16 and 34 years old, representing an age group that tends to be more aware of and eager to try new products.

The impact of Africa’s younger, educated, and urbanised consumer demographic is visible in Africa’s GDP growth between 2010 and 2019. At 4 percent, the continent overshadowed the GDP growth of the EU28 (1.7 per cent) and LATAM (1.7 per cent).

The five largest economies on the continent are Nigeria, South Africa, Kenya, Morocco and Egypt. These countries also have the most competitive retail sectors, and their eCommerce sectors are growing rapidly, thanks to several leading companies which operate across the continent. Leading players include Jumia, Konga, Takealot, and Kilimall.

African eCommerce faces numerous challenges, like a lack of national street address systems in many African countries and the expense of last-mile delivery. Most Africans also are unbanked.

Both formal and informal retail are hampered by Africa’s annual shortfall in infrastructure investment, between $67 billion and $107 billion. It hinders development in the logistics sector as it imposes a 40-60% surcharge on the cost of goods.

The eCommerce sector is not just facing infrastructural challenges like the above – there is a need to educate consumers about online retail and gain their trust. According to a 2021 Boston Consulting report, 40 per cent of African smartphone users do not know how to make purchases online. Education and trust are the predominant factors contributing to this shortfall. Among the respondents in the study, 85 per cent indicated they do not know where to find products online, and 82 per cent said they do not trust eCommerce sites.

Africa remains under the global eCommerce average – even in Africa’s biggest markets. The continent is seeing a continuous increase in technology-related productivity in sectors like financial services, education, health, retail, agriculture, and government. These sectors are predicted to reach a value of between US$148 billion and US$318 billion by 2025. It also is forecasted that the continent will experience the greatest growth in smartphone adoption by 2025.

Nigeria has established itself as a vibrant hub for new tech businesses, with e-retailer Jumia as one of the country’s biggest success stories. The Carrefour Group partnered with Jumia to offer Carrefour-branded products on their e-commerce website. Jumia also made its NYSE debut in 2019, surpassing a US$1 billion valuation.

The number of digital shoppers in Africa doubled between 2015 and 2021. The most competitive markets in retail are Nigeria, South Africa, Kenya, Morocco, and Egypt, the five largest economies on the continent. In these countries, digital buyers purchase clothing, shoes, and consumer electronics.

But while digitalisation is a significant game-changer in Africa’s retail sector, it’s important to note that informal trade remains dominant in consumers’ buying habits. Retailers in the informal sector distribute approximately 80 per cent of all household consumer goods. Informal businesses represent 92 per cent of firms in Nigeria.

Forward-thinking entrepreneurs and startups are launching e-Logistics and eCommerce supply chain startups to address infrastructural challenges informal traders experience. These B2B startups provide 24/7 marketplaces from which informal retailers can order stock and consolidate highly fragmented supply chains to allow retailers to pay as they go, providing higher profit margins for smaller and informal businesses. The new partnerships and business models that result from these initiatives are expected to drive significant transformation in informal trade.

Wasoko is one of the continent’s fastest-growing B2B retailers. They partner with key stakeholders in distribution hubs that they manage and connect digitally to corner shops. Shop owners can order stock by phone, ensuring their products are consistently available and company agents fulfill them. Thanks to technology originating from Mobile Money, B2B companies like Wasoko can also use data to offer retailers credit.