Social Media Posing a Threat to African E-commerce Specialized Platforms | The African Exponent.
- Meta, the parent company of Facebook, WhatsApp, and Instagram, is the clear leader in social commerce across all the markets.
- It is likely that more and more Small-Medium Enterprises will begin to adopt social media as their primary mode of e-commerce.
- African e-commerce platforms must develop models that are more communicative and social media-like.
Africa is one of the fastest-growing e-commerce markets in the world. From 2014 to 2018, the number of online shoppers in the continent increased on average by 18% annually, against a global average of 12%, according to the United Nations Conference on Trade and Development.
Thanks to the Covid-19 pandemic, this growth trend has risen exponentially over the past 2 years, with undeniable signs that Africans now prefer social media to do their shopping.
While social media has had its fair share of negative criticism in Africa , a new report has suggested that it is helping thousands of small African enterprises to thrive. Conducted by GSMA, a non-profit industry organisation that represents the interests of mobile network operators worldwide, the study reveals that social media is becoming the primary mode of e-commerce for a significant portion of micro, small, and medium-sized enterprises (MSMEs) in six African countries: Nigeria, Kenya, Ethiopia, Ghana, South Africa, and Egypt.
The report which was exclusively accessed by the African Business found that 60% of micro enterprises, 49% of small enterprises, and 33% of medium-sized enterprises in the sample rely solely on social media for their e-commerce needs.
Meta, the parent company of Facebook, WhatsApp, and Instagram, is the clear leader in social commerce across all the markets, except Ethiopia, where Telegram, a Virgin Islands-based platform, has a 95% market share. The popularity of social media platforms like Facebook and WhatsApp is almost perfectly aligned with that of mobile subscribers and internet usage, both of which have doubled on the continent in the past decade.
As technology continues to penetrate the region, it is likely that more and more MSMEs will begin to adopt social media as their primary mode of e-commerce. This could lead to greater pressure on dedicated e-commerce platforms such as Takealot, Kilimall and Konda.
“Social media is the most accessible tool to market your goods without needing a high level of digital literacy, training, or registration processes,” says Nigham Shahid, senior insights manager at GSMA. “People were already using social media to communicate with each other, hence they just added it on as a first step to their business sales without further investment.”
By contrast, e-commerce platforms in Africa, such as Jumia, are primarily geared towards an urban, banked user base, which represents only a small portion of the sub-Saharan African population.
According to Shahid, platforms like Jumia ,Kilimall and Konga are really scratching the surface, and social media-based arrangements are filling a gap . The greatest advantage social media is its informality, social messaging, and cash-on-delivery option, making it popular as an alternative to e-commerce platforms. This is despite the fact that it is not their primary function.
The high value of personal relationships in many countries across the continent is a red flag for Amazon-type business models. Just after the preference for cash, the third most commonly cited reason for customer dissatisfaction is that they prefer to interact with the merchant.
Financial inclusion key to e-commerce
South Africa is the only country surveyed where specific e-commerce marketplaces are more relied upon by MSMEs than e-commerce via social media.
In Egypt, only 6% of MSMEs in Africa’s third biggest economy use e-commerce platforms. Both Egypt and South Africa have similar levels of digital literacy and thriving digital ecosystems, with Egyptian start-ups even raising more money in 2022 ($823m) than South Africans ($555m).
According to GSMA, the difference in their usage of e-commerce platforms lies in payment preference. The average consumer in South Africa is much more used to paying online, while in Egypt there is a prevalence for cash payments.
World Bank records that 26% of Egyptians aged over 14 had a bank account in 2021. For South Africa, this number triples to 84%. A population with a high level of financial inclusion, as a result, appears to be a prerequisite for a successful e-commerce platform.
Shippers are still suspicious of e-commerce
Mobile money providers and e-commerce start-ups are finding it hard to introduce mobile money to e-commerce platforms, as businesses of all sizes, GSMA found, still prefer to use cash on delivery for payments.
This is despite mobile money being widely used throughout sub-Saharan Africa for personal transactions. In East Africa, GSMA counts approximately 300m registered accounts for a population of 477m people.
But customers there are reluctant to transact on ecommerce platforms, with significant distrust around the protection of personal data and customer funds, the reports says.
This doesn’t translate to mobile money not being used. People will tend to use social media to find what they want and then pay through their mobile phone live with the re-seller.
In an interview on Belgium radio station RTBS, Senegalese writer Felwine Sarr explained that, in his home country, economic interaction puts emphasis on the relationship, via negotiation on the price and discussions, before the quantitative exchange.
E-commerce platforms should be remodelled
According to the GSMA survey, access to new customers, increasing revenue, and improving ease of doing business were all cited consistently as reasons to begin selling online across all businesses.
Here, established platforms may have the upper hand. Facebook, Telegram, or even TikTok were not initially conceived to sell goods and hence have many flaws when it comes to using them for business purposes.
One way to look at the African e-commerce market, therefore, is to develop models that are more communicative and social media-like and imitate what is already happening for many African costumers in informal markets – a challenge for e-commerce entrepreneurs which is surely not as easy as it sounds.
Sources: African Business; Quartz