13 Feb Five things MultiNational eCommerce Companies Need to Know Before Expanding To and Across Africa
We had a really nice call with a well experienced representative of one of the largest and fastest growing mobile commerce retailers in the world yesterday around their expansion across Africa. The call was interesting and enjoyable and highlighted the value that we as African Payment Solutions can add for large eCommerce companies from a strategic and tactical perspective on their expansion across the continent. I thought we could share some of our insights (and I’m sure they won’t mind some of our joint insights) into the best way to go about expanding to and across Africa. They already have a toe in the water (funnily enough some of our people have already been buying from them for a couple of years), a kind of soft launch which is a clever way to do it. Not to detract from below, but Kenya, Nigeria and South Africa are conclusively the main eCommerce hubs of Africa right now, so not to waste too much of your time with the outliers, our focus will be on the dynamics of those: 1. DEMOGRAPHICS When it comes to size of populations, Kenya 50m, Nigeria almost 200m, South Africa 60m. South Africa has one of the highest gini-coefficients in the world and has a well educated middle and upper class who are connected, literate and experienced in shopping on a mobile and PC. Nigeria with the biggest population is divided along rural and urban lines. More than half the population have a low level of literacy and are living in rural areas that are very under-resourced. More than 8 cities have more than a million people and Lagos has 10m, with relatively high literacy levels and connectivity, and is a good place to start. Kenya has a 70/30 rural/urban spread, 80% literacy rate and almost 10% of the population live in Nairobi. English is well understood in the main cities of all three countries. 2. INFRASTRUCTURE The level of infrastructure varies across the three countries. In Kenya and Nigeria the physical infrastructure is under construction - poor roads, erratic provision of electricity and inconsistent delivery addresses. Mobile connectivity is relatively good and affordable in cities like Nairobi and Lagos and most is via mobile 3G and more recently 4G. 3. DEVICES In Kenya and Nigeria it is a mobile-only economy and smartphone ownership as a percentage of mobile users is less than 50%. In South Africa, eCommerce can expect a combination of PC and mobile shoppers, and smartphone ownership as a percentage of mobile users is more like 80%. 4. ABILITY TO GET PAID Payment at the checkout is a pretty simple choice for eCommerce companies - Kenya is M-Pesa and scheme cards, Nigeria is mainly cards and bank transfer, and South Africa is cards. Repatriation of funds is easy from Kenya and needs some work when it comes to Nigeria (liquidity) and South Africa (capital controls). 5. eCOMMERCE READINESS AND ROLLOUT STRATEGY Based on our experience of eCommerce expansion across Africa from observing the ease and speed with which expansion occurs with our multinational eCommerce merchants: South Africa is easy and the way has been paved by large eCommerce companies like Takealot. Nigeria is the biggest market and seems like a good bet, but based on the problems experienced it is the most difficult market to be successful in. Kenya is a relatively easy and friendly jurisdiction to launch eCommerce into - the people are friendly, the populous is tech friendly, and payment with M-Pesa and card are relatively well developed. The answer is to take baby steps and to expand slowly and in a targeted way focusing on one or two territories. Test and learn and then take it from there. If it is our choice it would be to start with South Africa, then Kenya and then when you are feeling brave, Nigeria. Services include: THANK YOU - THE TEAM AT AFRICAN PAYMENT SOLUTIONS
