Nigeria's retail sector leads the way in terms of digital innovation

20 November 2018

The advent of a digital revolution in Africa has coincided with substantial growth in its consumer market, leading the continent to “leapfrog” western markets in terms of digital retail methods, according to a new report from global management and technology consultancy Bearing Point. 

The population across Africa is rapidly digitalising. Recent reports have indicated that the total number of online connections on the continent might surpass 1 billion by as early as 2022. In addition to most accessible costs, this increase in digital consumers can be attributed to an overall increase in prosperity levels.

According to a new report from Bearing Point, prosperity on the continent is increasing rapidly and will continue to do so in the near future. Currently, the middle class in Africa is comprised of as many as 350 million people, a figure that is expected to reach 900 million people by 2040.

Shopping Profiles of Africa

Growing prosperity brings with it a tendency to consume, and the African consumer market has already entered a phase of steady growth. Nevertheless, the retail market is currently comprised of small brick and mortar companies, and lacks the infrastructure to meet this considerable growth in expected demand.

As a result, retailers turned to innovation to leverage the growing digital population to develop their capabilities in the ecommerce and m-commerce segments. Firms are essentially working on agile and flexible models that will allow them to cope with expanding and increasingly nuanced demands.

As explained by Bearing Point, “Infrastructure challenges such as lack of transport, banking infrastructure, and inadequate logistics services have inspired sub-Saharan retailers to develop alternative approaches leveraging the platform economy. They are leveraging communities of consumers to conduct some retail functions.”

CHART: The customer as a partner,

The report narrows the infrastructure challenges on the continent down to three shortcomings, namely the poor quality and accessibility of transport infrastructure, poorly organised postal address systems, and what the report terms as “difficult and heterogeneous frontier management.”

Africa’s largest economy by GDP – Nigeria – is a prime example of a market that has leveraged technological enhancements to solve some of these issues in its retail sector. Perhaps the biggest substantiation of this claim is the pan-African ecommerce giant Jumia, which was established in Nigeria in 2012.

Such vast online networks are also aided by an evolving population, which is increasingly receptive to online markets. As per the report, Nigeria’s online activity exceeds that of massive markets such as China in certain sectors, including the proportion of online shoppers amongst early adopter. 

Online marketplaces might be the answer to Africa's unemployment problem

01 April 2019

Unemployment has been one major barrier to economic growth in Africa, although the expanding economy of online services in the region is facilitating entirely new expansive job markets, according to a new report from global management consultancy Boston Consulting Group (BCG).

The firm’s analysis is based on the rapid emergence of a number of new ventures that it terms as “online marketplaces,” including global mobility solutions such as Uber, Souq, Thundafund, Travelstart, as well as local initiatives such as Jumia. The advent of such ventures has caused mixed reactions within Africa.

Some have argued that Uber and other ecommerce solutions have eaten into the markets of more traditional businesses across the continent, leading to more unemployment and the collapse on the indigenous business environment. BCG’s report has countered these claims, stating that these ventures contrarily create greater opportunities for employment.

Online marketplaces and a virtuous cycle of economic growth

In essence, these ventures not only offer the opportunity to engage on a voluntary basis, but also offer higher pay, a better quality of life and more flexibility in working conditions. The ventures also create interconnectivity with other African economies, which is lacking with traditional indigenous businesses.

As per the report, this interconnectivity offers wider and more sustainable benefits, and ensure that economic development in Africa is not only concentrated in some of the continent’s largest economies, but also spreads to regions that have thus far been left out of the economic arena.

“In much of Africa, where the retail sector and formal labor markets remain underdeveloped, the potential downsides of the rapid expansion of online marketplaces are negligible—and the potential gains significant,” says the report.

Online marketplaces and small enterprises

The firm’s claims are backed up by figures from its own analysis, which predicts that online market places have the potential to generate as many as 3 million new jobs in Africa by as early as 2025. These jobs fall in a range of domains, including delivery services, retail and hospitality.

In addition to generating greater employment, the new economic arenas could also boost economic activity across the region, primarily by making the movement of goods and services more efficient and more expansive in its geographic scope, and consequently increasing consumer expenditure.

Nevertheless, the emergence of such venture is not enough in itself to bring about the potential change. The report asserts that enabling government policies are crucial to ensure that these businesses have the regulatory and fiscal room to expand. To this end, the firm suggests a three-part solution going forward.

Obstacles for Africa's brick and mortar sector

The three areas of focus proposed include the collaboration between the public and private sectors across the continent, the free exchange of resources across borders, and investment in developing the appropriate technological architecture required in the business models of various online marketplaces. According to BCG, a lot of work remains to be done in all these domains.

“The low level of online marketplace usage across Africa means that considerable work must be done at many levels to ensure that these platforms fulfil their potential to become an important source of new jobs. This promise relies on the ability of the private and public sectors to come together and collaborate to create the right digital environment. Instead of being seen as forces of chaotic disruption, online marketplaces should be allowed to develop in an environment that is designed from the outset to bring economic and social benefits to all,” says the report.