Tue, Jul 14, 2015
With great optimism about the economic promise in Africa, entrepreneurs have been pondering ways of exploiting this growth.
With optimism about Africa’s economic promise at an all time high, entrepreneurs have been pondering ways of exploiting this growth. For example, e-commerce stores have been springing up in Africa, trying to come up with solutions to the myriad problems there. However, many of them have faced challenges that are beyond what they expected coming in. In this piece, I will explore these challenges and suggest ways in they can be overcome.
Many Africans are still highly skeptical of online shopping, due to cases of online fraud. For example, many people do not feel safe putting their financial information—such as credit cards, etc on websites. This tendency is however less pronounced in younger, educated Africans although these may not have the spending power needed to fuel businesses. E-commerce businesses should work aggressively to cultivate a sense of trust by making their online security systems robust. Meanwhile, they should pursue other alternatives such as cash on delivery.
While efforts are being made to connect more African households and businesses to broadband networks, internet services are by and large still too expensive in Africa. This means that many Africans don’t find it economical to spend time browsing e-commerce sites for merchandize when they could easily obtain in from physical stores. For the success of e-commerce, governments should continue investing in fibre optic networks so as to increase internet connection on the continent.
Supply and distribution chains
With non-functioning postal systems in most countries, it can be very difficult for vendors to ship goods to their customers. Many existing e-commerce sites rely on traditional transport networks such as motorcycles and buses, which are usually inefficient thus increasing operational costs. E-commerce sites should continue experimenting with alternative delivery mechanisms so as to see what works best on the continent.
Highly Fragmented markets
Africa has too many countries with a lot of diversity—both culturally, economically and politically. This creates barriers in languages, culture and cross border payments which makes it difficult for e-commerce sites to scale easily so as to enjoy economies of scale. To mitigate this challenge, countries should continue forming regional economic blocs so as to harmonize business conditions.
High illiteracy rates
High levels of illiteracy mean that many individuals cannot participate directly on e-commerce platforms. Countries need to continue investing in education aggressively so as to increase the number of people who can read and write.
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