E-Commerce and Digital Transformation: China Sets Model for Africa

E-commerce is playing a big role in the transformation of Africa into a digital society, thanks mainly to Chinese companies that are not only stimulating the competition but that are also fostering the digital scene

The old narrative of Africa on the margins is fading fast. Here, the People’s Republic, whose digital economy has experienced massive growth over the last decade, stands as a model for the continent, which is quickly moving towards e-commerce showing promising results.

Indeed, internet and e-commerce are playing a big role in leading Africa’s transformation into a digital society, thanks mainly to Chinese tech companies that are not only stimulating the competition but that are also fostering the digital scene.

One of them is Kilimall that was founded by an ex-Huawei employer from China in 2014. Named after Africa’s highest mountain Kilimanjaro, Kilimall was the first Chinese e-commerce company to enter Africa and it is now one of the continent’s biggest e-commerce platforms.

© Unsplash. Durban, South Africa. Many international tech giants, especially Chinese, have entered the African market fostering the local digital scene.

In 2012, the founder and chief executive of Kilimall, Yang Tao, was sent to Africa to help local telecoms companies build mobile payment platforms. After spending some time there, he became aware of the inconvenience of shopping in African countries because of the lack of balance between price and availability. “The price of goods was very high in Africa while choices were limited,” Yang said.

Therefore, as African middle-class was booming, Yang Tao saw in the e-commerce sector an answer to the emerging demands of a brand-new society, whose quality of life was getting quickly higher.

In 2014, he thus launched Kilimall, an e-commerce platform selling different kind of products, including electronics, clothing, home appliances, and make-up. In 2015, the company also allowed thousands of Chinese suppliers to sell in the platform and they now make up half of the sellers on the marketplace.

Today, Kilimall has about 10 million users and over 10,000 sellers from both Africa and China. Moreover, inspired by the Chinese experience, the African marketplace also provides its own online payment system, Lipapay, and logistics structure, KillExpress.

“No one could ignore the trends, and we should leverage digitalization to realize the new possibility for Africa and China. E-commerce is a new option to accelerate economic growth and create employment,” Yang said.

Although African consumer habits are completely different from the Chinese ones, Kilimall’s Chinese roots have certainly played an important role in terms of the experience of operations and marketing techniques, which made it stand among local competitors.

One of them is the Nigerian Jumia, the largest e-commerce operator in Africa. Not only Jumia operates in 23 different countries but it also owns 48% of the continent’s market. Moreover, this platform was able to jump from 2.7 million users in 2017 to over 4 million users the next year.

Headquartered in Lagos in Nigeria, Jumia was founded in 2012 by two ex-McKinsey consultants, Sacha Poignonnec and Jeremy Hodara, together with Tunde Kehinde and Raphael Kofi Afaedor. It is the first African technology company listed on the US stock exchange.

Despite it is an African company, Jumia did not escape the Chinese influence. Indeed, just like the Chinese platforms, the African marketplace also provides a variety of services such as food delivery and travel booking. Made of nine portals in 23 countries, Jumia serves every possible need, from the classic e-commerce to travel, from food to taxis, from job offers to the sale of houses. It is called the “African Amazon” but it actually represents the sum of eBay, Booking, Uber, and Uber Eats, looking more like Alibaba than Amazon.

© Bloomberg. Jumia has adapted e-commerce as we know it to the African reality, thus creating an African way to do e-commerce.

Cases like Kilimall and Jumia perfectly represent Africa’s recent digital growth. According to the research site Statista, the digital industry was worth $16.5 billion in 2017 and it is now expected to hit $29 billion by 2022 while necessary infrastructure, such as mobile phone ownership, and household incomes continue to rise.

Moreover, with the surge of internet penetration on the continent, many Africans are easing into the habit of shopping online. According to McKinsey’s report, today, e-commerce in Africa represents 2-3% of total purchases, but it could account for up to 10% of retails sales with a value of around $75 billion by 2025, as more Africans gain access to the internet.

Although the e-commerce sector is still far from Africa’s largest earner, the market is growing, and it is growing fast. The potential is, therefore, huge. Especially taking into account that here the use of the smartphone has grown by 70% only between 2017 and 2018, creating a potential base of 660 million internet users.

Therefore, if in a metropolis like Lagos, where shopping centers are few, buying on the internet is just more convenient, in peripheral centers and villages, where many products do not even arrive, it is a necessity. “We’re making people’s lives better,” says Ms. Poignonnec. “But the path is long. Even for the upper-middle-class e-commerce remains a novelty,” she adds. But China is doing more, it is exporting an e-commerce culture followed by its idea of “cashless” society. And consumers seem to appreciate the change.

Africa’s e-commerce market will amount to $18 billion in 2019 and reach $32 billion by 2023, with an annual growth rate of 15.4%, according to market and consumer data provider Statista.

Once again, behind this fast digitalization, there is Beijing, which has found in Africa a relatively young market with huge potential. China has indeed spent the past decade building the region’s digital infrastructure, allocating billions of dollars in the continent and becoming the largest trading partner of Africa as a whole.

Actually, Beijing sees in Africa a friend among developing countries. The African market is so much similar to China’s one before its explosive economic boom that at the closing of the summit of the China-Africa Forum for Cooperation held in Beijing in 2018, Chinese President Xi Jinping said China shares with Africa a common future to pursue through a “joint march”. In this framework, Chinese enterprises are serving as a bridge for closer cooperation.

Chinese companies like Huawei and ZTE effectively helped to develop the continent’s mobile network, leading the growth of mobile phone and internet penetration. These early investments contributed to the explosion in mobile telephony and to the birth of e-commerce in many African countries.

But China’s intervention in Africa did not come out of the blue. In order to pursue the realization of its massive initiative of a renewed digital Silk Road, African technological development is necessary. The Belt and Road Initiative here is, therefore, integrated into the region’s agenda, which has the goal to link the 54 countries in an area of free trade and free movement of goods and people together with a shared peace on the entire continent.

© Unsplash. Lagos, Nigeria. While Africa is experiencing a true digital transformation, Nigeria is home to 40% of African e-commerce companies.

In the past, structural limitations and immature markets have deterred global players from establishing roots in Africa. But homegrown e-commerce platforms such as Kilimall or Jumia reflect the appetite both among customers and local entrepreneurs for a digital transformation. From one of the poorest countries in the world, China now sits at the big table. It thus has both the knowledge and the will to drive Africa through this transformation.

Referring to the Celestial Empire, Dylan Piatti, chairman of E-commerce Forum of Africa, said: “We don’t need to reinvent or create the wheel but we can take the best practices and the learning that they have gone through and link them to what we are doing here.”

Therefore, on one hand, Africa represents both a challenge and an opportunity to expand its influence for China. But on the other hand, the Dragon sets a model for the continent, which sees in the partner a unique opportunity to leapfrog its own shortcomings to find development through an advanced e-commerce environment.

Jumia: the Nigerian E-Commerce that is Rewriting Africa’s Old Narrative

The old narrative of Africa on the margins is fading fast. Internet and e-commerce are playing a big role in leading the transformation, thanks mainly to Jumia: the Nigerian e-commerce that operates in 24 countries across the continent

Many international tech giants, especially Chinese, have entered the African market fostering the local digital scene. Thanks to a stimulating competition, the e-commerce market is thus emerging with extraordinary results.

According to the research site Statista, the digital industry was worth $16.5 billion in 2017 and it is expected to hit $29 billion by 2022 while necessary infrastructure, such as mobile phone ownership, and household incomes continue to rise.

With the surge of internet penetration on the continent, many Africans are easing into the habit of shopping online. According to a McKinsey’s report, today, e-commerce in Africa represents 2-3% of total purchases, but it could account for up to 10% of retails sales with a value of around $75 billion by 2025, as more Africans gain access to the internet.

Here, the e-commerce market is fully represented by the Nigerian Jumia, Africa’s first e-commerce website, which gained 48% of the continent’s market operating in 23 different countries. A platform that jumped from 2.7 million users in 2017 to over 4 million users the next year: an all African success story.

© Jumia. The Lagos-based marketplace Jumia is Africa’s number 1 online retailer, which provides a large variety of services in addition to online sales.

Headquartered in Lagos in Nigeria, Jumia was founded in 2012 by two ex-McKinsey consultants, Sacha Poignonnec and Jeremy Hodara, together with Tunde Kehinde and Raphael Kofi Afaedor. Last April, the Nigerian marketplace became the first African technology company listed on the US stock exchange.

With three-figure growth rates, Jumia became Africa’s first unicorn when, in 2016, it achieved a $1 billion valuation after a $326 million funding round that included Goldman Sachs. According to data provided by the company, in 2018, the marketplace processed more than 13 million packages across many African countries such as Algeria, Egypt, Cameroon, Kenya, Ghana, Ivory Coast, Uganda, Morocco, Senegal, Tanzania, and of course, Nigeria.

However, Jumia does not sell products only. Like Chinese platforms, the African marketplace also provides a variety of services such as food delivery and travel booking. It is made of nine portals in 23 countries that serve every possible need, from the classic e-commerce to travel, from food to taxis, from job offers to the sale of houses. Jumia represents the sum of eBay, Booking, Uber, and Uber Eats, looking more like Alibaba than Amazon.

In 2017, e-commerce in Africa generated $16.5 billion in revenue and it is expected to reach $29 billion in 2022. In a region where the internet is not fully spread and financial institutions are almost absent, Jumia has managed to set its own e-commerce model.

Due to its variety, the company’s founders believe it is going to achieve Chinese-like successes, with an extraordinary boom both in Africa and worldwide. And big international companies seem to share the same feeling as major firms such as Rocket Internet, Mtn, Orange, Axa, and Goldman Sachs are among the first investors.

But what is the secret of this success? In addition to offering products in local currencies, Jumia has adapted e-commerce as we know it to the African reality where not everyone has a bank account or an e-wallet. It thus allows customers to buy goods from their smartphones from the most remote area and then pay by cash on delivery (COD), which is actually the most preferred payment method in Africa.

Moreover, in a continent where only one-third of the population lives less than 2 kilometers from a paved road and wheel transport costs up to eight times more than in Brazil or Vietnam, Jumia offers a delivery-time from one to two days in urban areas, and under six days in other parts of the countries. In order to reach those standards, the company had to set up its own logistics network. The CEO and founder Poignonnec has explained that they “have a distribution center in all the big cities, with a stock of products, while for delivery we integrate our fleet with local suppliers.”

© Bloomberg. In addition to offering products in local currencies, Jumia has adapted the online retail to the African reality, thus creating an African way to do e-commerce.

The mission is to connect African consumers and entrepreneurs in order to do better business together. Jumia is, in fact, creating a platform where small, medium and large African companies link with their potential market, thus becoming a hub for products and services.

Today, it counts over half a million sellers and over 4 million users. Moreover, in addition to responding to the needs of consumers and businesses, it also trains and offers employment for many Africans who are qualified in areas such as Engineering, IT, online marketing, and web development.

In a metropolis like Lagos, where shopping centers are few, buying on the internet is more convenient. However, in peripheral centers and villages, where many products do not even arrive, it is a necessity. Therefore, during the last Black Friday, Jumia received a million orders. “We’re making people’s lives better,” says Ms. Poignonnec. “But the path is long. Even for the upper-middle class e-commerce remains a novelty,” she adds.

In 2017, Jumia reported revenues of over $566 million, a 42% increase compared to 2016. But it now aims to make Egypt its largest market on the continent, using the vast network of unlicensed street vendors.

Although its overall successes, Jumia is now targeting Egypt aiming at making the country its largest market on the continent by leveraging the vast network of unlicensed street vendors. This is why the company asked the government to regulate the network of street vendors as soon as possible by offering very favorable tax incentives and loans so that they can offer Jumia’s online product catalog to passers-by, thus creating an African way to do e-commerce.

Egypt’s 96 million consumers are gradually discovering online shopping as an alternative to their traditional cash-driven retail outlets. Only 5 to 8% of Egyptian internet users have made a purchase online, and it was mostly in cash. Therefore, the “informal” economy, that of street shops and street vendors, is worth at least 37% of total domestic consumer spending.

According to the company, Jumia’s sales in Egypt grew 190% in 2017 from the previous year as consumers and retailers – struggling with inflation hovering around 30% for most of 2017 – looked for cheaper products and bigger audiences. Today, Jumia has served 1.5 million customers since its Egypt debut in 2012 but it still represents the marketplace’s second-biggest market after Nigeria.

In a region where the internet is not fully spread and financial institutions are almost absent, Jumia has managed to set its own e-commerce model. Moreover, in order to lead consumers to prefer online payment to COD, the company also announced a partnership with Mastercard for its payments system JumiaPay.

© Unsplash. Nigeria. Being Africa’s most populous country, Nigeria is home to 40% of African e-commerce companies and represents Jumia’s first market.

The old narrative of Africa on the margins, disconnected from the global economy, driven by conflict or corruption and heavily dependent on foreign intervention and donations, is fading fast. The internet is playing a big role in leading the transformation, as well as the increasing importance of e-commerce.

In recent years, the African economy has continued to grow steadily. In 3 of the 54 countries in Africa, the per capita GDP is higher than that of China, and the purchasing power of African people is gradually increasing. Africa’s population is also growing rapidly, especially its middle class, which is expected to make up 1.1 billion out of 2.5 billion Africans by 2050. And this emerging population with increasing disposable income represents an obvious opportunity for e-commerce.

With 195 million people, Nigeria is the most populous country in Africa and the largest economy in the continent in terms of gross domestic product. The country’s internet penetration rate is 48%, and 40% of African e-commerce companies are based here.

However, it is not all “fun and games”, though. In the Dark Continent, e-commerce platforms that have the ambition to change customers’ shopping habits at a continental level must deal with 54 different markets, 54 central banks, exchange rates, and with many different taxes and legislative systems. It seems enough to discourage any online shopping website.

Nevertheless, although e-commerce is far from Africa’s largest earner, the market is growing, and it is growing fast. Therefore, the potential is huge. Especially taking into account that here the use of the smartphone has grown by 70% only between 2017 and 2018, creating a potential base of 660 million internet users.

While investors believe in the startup, consumers show to appreciate Jumia’s offers. And while the Nigerian company is shaping the local e-commerce sector as it pleases, it will continue fostering the internet landscape without disappointing the expectation.

The Asianparent app targets the Asian and African markets

TheAsianparent, a Singapore-based start-up, has around 23.5 million monthly active users and was born in 2009 as a blog for parents

Probably there is a category of people that will always be there, that of parents. And in our technological and social era, obviously, parents also have their application. In particular, The Asianparent, based in Singapore, started its life as a blog for parents in 2009 and has become a multinational content and community platform with over 23.5 million monthly active users.

After the great success achieved in China, TheAsianparent, the largest parenting platform in Southeast Asia, has decided toexpand into more markets in Asia and Africa and plans an e-commerce service in the future. Currently, TheAsianparent has 180 employees in 12 countries and a three-C strategy: content, community and commerce.

His last fundraising round was led by Fosun, a multinational company focused on the family, and joined by JD.com

After its last fundraising round, led by Fosun (one of the largest e-commerce platforms in China), the company decided to expand. TheAsianparent intends to use the proceeds to further develop its app, expanding into Asian and African markets such as Nigeria, Kenya and South Africa, where mortality rates for children under 5 are much higher than in a country like Singapore.

Roshni Mahtani, founder and CEO of the TheAsianparent, said in an interview at the Global Mobile Internet Conference in Guangzhou last month: “We go where babies are. Southeast Asia is a booming market where internet penetration has been growing exponentially and shows no signs of slowing down “.

JD.com will support the company on “multiple levels”, offering e-commerce experience and product distribution on the JD website

In the expansion programs, the company also plans to launch an e-commerce platform within the app for Southeast Asia. The products will include skincare, cosmetics and household items created by the company, which hopes that at least 20% of users will purchase goods.

“There’s a lot about e-commerce that we don’t know yet. That is where JD comes in – to plug the gap and share their network and experience in helping us scale quickly” said Mahtani.