Thought Leadership

Is informal retail the real driver of Africa’s eCommerce future?

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What is informal eCommerce and why is it an overlooked aspect of the eCommerce landscape?

Whenever I visit my parents’ house, I see their landline phone sitting in the corner of their kitchen counter. I usually pay it no attention but, every now and then, it reminds me of my childhood when even the ‘rich kids’ could only dream of this thing called a mobile phone.

There are now more than half a billion mobile phone users in Sub-Sahara African, and the term “leapfrogging” has become a natural part of our vocabulary – referring to the phenomenon of how the continent quickly skipped past the teething problems of landline infrastructure and landed at an advanced stage of mobile technological development, unlocking the potential for faster economic growth.

Africa is now heading into another wave of technological change, the arrival of eCommerce. However, once again, Africa is under the spotlight for supposedly lagging behind the rest of the world – African online retail accounts for only 3.5% of global retail sales, while its population amounts to around 17%. Perhaps this is because the world fails to see that there’s a completely different eCommerce story at play here, one with African characteristics that doesn’t fit standard, global definitions.

280m Africans shopped online in 2020, compared to 45m in the UK for example – call it 2.2% of Africans vs. 81% of people in the UK. Now, whilst that may be sound evidence to support the lag, the numbers do not necessarily account for what is known as informal eCommerce activity. In the informal e-commerce marketplace, buyers and sellers leverage social media platforms such as Facebook or WhatsApp. The platforms connect supply and demand but do not necessarily engage directly in the other aspects of online commerce such as digital payments and online order fulfilment (e.g., delivery tracking).

Informal eCommerce is a very real thing in Africa, reflecting the fact that almost 80% of all retail in Africa would also be classified as informal but most figures are probably hugely underestimated, due to the informal nature of the sector and the challenges in measuring its true scale.

Recently, I was scrolling through my feed on Instagram when I discovered a local fashion brand. I immediately fell in love with this tracksuit I saw. Upon scrolling up to the top of the page, I found a link to WhatsApp that included direct message instructions for those who wanted to order. Two days later I received my new tracksuit; a successful eCommerce purchase that wouldn’t feature in traditional metrics.

But this informal channel for eCommerce isn’t limited to just fashion retail, it's infiltrating sectors such as furniture, home goods, food services and so much more, creating an increasingly fragmented, yet beautifully complex, locally relevant, infrastructure.

Some of the largest traditional eCommerce players in the region don't deliver to households situated in townships and informal settlements such as Gugulethu in Cape Town, Kibera in Kenya, or Makoko in Nigeria. That means that in a country like South Africa, brands are potentially missing out on millions of households. However, the young residents of these communities know how to navigate streets that don't feature on your average GPS app and are building infrastructures that can connect even the most informal settlement with the benefits of eCommerce.

The likes of Takealot and Jumia have end-to-end services but for an informal retailer they need to find other ways to connect the dots. People are creating apps to list their local stores, scooters to facilitate delivery, platforms for customer service and so on to open these markets, while quietly creating employment opportunities along the way. They are giving township and informal settlement dwellers the opportunity to experience the kind of convenience previously reserved for the middle to upper income citizens living in more well to do suburbs.

Most multi-national brands and large local heavyweights possess the kind of infrastructure that could super charge any informal operation. Coca-Cola, for example, is famed for its already far-reaching distribution network, people like Simon Berry, partnered with Coca-Cola to deliver essential medicine (AidPods) by piggybacking off their amazing distribution network in a programme called CokeLife that started in 2008, so and, for them, there’s an opportunity to tap into a Micro Distribution Centre (MDC) model to capture the widening and diversifying base of informal retailers to be included on the menus of as many meals as possible.

Through partnership with these informal eCommerce pioneers, brands could be providing or sharing resources like marketing collateral to ensure messages on informal retailers’ preferred channels (WhatsApp, Instagram, Facebook, etc.) are communicated in line with the “sponsor brand’s” communication architecture. It could be through providing subsidised wi-fi hotspots so that informal retailers can accept and fulfil more orders without worrying about data. It could even be a full-blown partnership that connects all the dots; aggregating the different informal components into a more formalised eCommerce ecosystem, complete with cash-based / mobile payment facilities and hyper-local 3rd party fulfilment partners for example.

The opportunities are endless and untapped. Brands who are willing to step back and see the bigger picture could unlock disproportionate growth in this area once they go beyond the eCommerce narrative.

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