CX key to e-commerce logistics enigma in Africa
The e-commerce market in the African continent is growing, no doubt. However, solving the logistics enigma, which is unique to the region, will be key to its ability to make money sustainably. Investing in research, developing physical infrastructure, connecting the digital dots and above all keeping customer experience (CX) at the centre is the way to solve it.
“The potential for growth and innovation is immense, driven by the continent's rapidly evolving digital landscape, expanding customer base, and increasing consumer trust in online shopping.”
This is how Lucia Munoz De Blas describes the African e-commerce landscape. She is the group chief logistics officer of Jumia, one of the largest e-commerce marketplaces in Africa.
Definitely, the e-commerce market in the continent is growing. For instance, Statista reported that e-commerce revenue in Africa is expected to show an annual growth rate (CAGR 2023-2027) of 13 percent, resulting in a projected market revenue of $59 billion by 2027.
But one of the most important drivers of this growth is internet and smartphone penetration into the continent. According to the World Bank, individuals using the internet in Sub-Saharan Africa increased from 6 percent of the population in 2010 to 28 percent in 2019 and 36 percent in 2021.
Evidently, Africa has witnessed a significant rise in internet penetration rates, opening up vast opportunities for e-commerce. And according to Blas, “The increasing accessibility of digital devices and internet connectivity has expanded the potential customer base, enabling more Africans to engage in online shopping.”
However, despite the increasing internet penetration, she pointed out that there are still areas with limited or unreliable internet access in Africa. “This can hinder customers' ability to browse and shop online, resulting in a less seamless experience. To address this, e-commerce companies can invest in optimising their platforms for low bandwidth connections and explore offline shopping options where feasible,” she said.
“At Jumia, we use JForce, our Independent Sales Agents, to penetrate underserved regions where traditional retail is limited,” she added.
“Logistics stakeholders need to digitise and automate their daily delivery processes to deliver on these rapidly evolving customer expectations.”
Soham Chokshi, Shipsy
Increasing mobile cellular subscriptions is another factor in Sub-Saharan Africa and it increased from 44 percent in 2010 to 79 percent in 2019 and 84 percent in 2021, according to the World Bank.
Thus, Blas reported that mobile commerce, or m-commerce, is flourishing in Africa. “With a large portion of the population accessing the internet primarily through mobile devices, there is a surge in mobile transactions and purchases. This trend has spurred the development of mobile payment solutions, making it easier for customers to shop online using their smartphones.”
There are several companies, including logistics service providers, entering this market after getting excited about the room for innovation and growth. For example, in May 2023, the Indian SaaS-based logistics management platform provider Shipsy announced expansion across Africa. Since the last few quarters, Shipsy grew its presence in African markets by onboarding customers in the courier, express and parcel, last-mile delivery, e-commerce, and retail segments.
Soham Chokshi, CEO & co-founder of Shipsy, who is also bullish about mobile penetration in the continent, noted that the proliferation of mobile devices has led to a surge in mobile commerce, enabling consumers to conveniently shop and make transactions using their phones.
“This trend is particularly exciting because it opens up opportunities for businesses to reach a wider customer base and tap into previously underserved markets,” he said.
Going beyond the internet and smartphones, the African continent is also witnessing the rise of social media and social commerce. Social media platforms are playing a significant role in shaping the African e-commerce landscape.
Blas pointed out that African consumers are leveraging social media channels for product discovery, recommendations, and even direct purchasing. “E-commerce platforms are integrating social commerce features, enabling customers to shop seamlessly within their preferred social media environments,” she said.
“While e-commerce in Africa has made significant progress in enhancing customer experience, there are still a few drawbacks that can impact the overall customer journey.”
Lucia Munoz De Blas, Jumia
Another trend that both Chokshi and Blas noticed is the growth of cross-border e-commerce within Africa. For instance, Chokshi said that with improved logistics infrastructure and increased connectivity, more African consumers are now able to access products and services from other African countries. “This expansion of cross-border trade is driving economic integration and fostering regional collaboration. It presents an exciting prospect for businesses to expand their operations beyond their home countries and tap into the growing demand across the continent,” he said.
Meanwhile, Blas noted that Africa’s cross-border e-commerce is driven by improved logistics infrastructure and favourable trade policies. “African consumers are increasingly looking beyond their local markets to access a wider range of products and brands from international sellers. This presents opportunities for e-commerce platforms like Jumia to facilitate cross-border transactions and support international trade,” she said.
Does that mean the continent already possesses the infrastructure to support this level of e-commerce growth? Certainly not.
Logistics enigma of African e-commerce
In fact, Blas noted inadequate logistics infrastructure, including warehouses, distribution centres, and transportation networks as a challenge for shippers in the region.
“Thus,” she added, “Jumia invests heavily in building and maintaining a robust logistics infrastructure across Africa. The company operates numerous warehouses and fulfilment centres strategically located to enable efficient order processing and timely delivery.”
Alastair Tempest, CEO of Ecommerce Forum Africa pointed out transport as one of the ingredients that was missing for African e-commerce business while speaking to STAT Media Group during air cargo Africa in Johannesburg in February 2023.
“The distance between capital cities in Europe is 1,200 kilometres while in Africa it is 4,200. It's an enormous difference. We tend to forget that Africa is such a very big continent. That makes logistics very difficult,” he said.
Tempest made an interesting observation that the cheapest way to overcome the infrastructure problem in the African continent is by embracing the air mode of transport. “What we need is more local carriers in Africa. Trillions of dollars are needed to upgrade African road infrastructure. Railways and seaports could be less expensive. However, the cheapest way to get over the infrastructure problems in Africa is by air,” he said.
While talking about the challenges in the African e-commerce landscape, Chokshi pointed out that using manual processes to map consignments to suitable logistics service providers (LSP) is tedious and inaccurate. And that's exactly what they are trying to solve on this continent.
“Tracking shipments across logistics partners, lack of standardised customer communication, inefficient benchmarking of 3PL performance, complexities in managing non-deliveries and return to origin (RTO) instances and invoicing errors and delays are some other critical challenges that shippers face daily,” he said.
To boost serviceability, shippers need to partner with multiple LSP. But every LSP has its unique strengths. Some guarantee rapid fulfilment, some have expertise in handling white glove operations, and some have specialised capabilities in moving sensitive goods and cold storage.
Chokshi added, “Shipsy empowers shippers to completely centralise and automate these processes. Using a single dashboard, shippers can view all their shipments across multiple LSPs on a single dashboard in real-time. They can provide distributors and customers with complete milestone-based visibility of delivery status. Our smart logistics management technology immediately triggers alerts in case of cost diversions in invoices. Using Shipsy, businesses accurately predict failures and reorganize delivery workflows to mitigate transportation risks, especially in terms of customer experience and costs.”
Shipsy is also helping shippers address cross-border logistics cost concerns by providing greater visibility into spot rates, automating freight procurement and negotiation processes and providing real-time visibility of container and air cargo movement.
Other challenges noted by Blas include the hurdles in the last mile, the fragmented nature of the market as well as fraud risks. Ensuring efficient and timely delivery to customers' doorsteps is crucial for a satisfying e-commerce experience. Thus, Blas noted that e-commerce players are investing in innovative delivery solutions, including partnerships with local logistics providers, deployment of delivery drones, and adoption of smart lockers.
She said, “Last-mile delivery, especially in remote areas, can be challenging due to poor road conditions and inadequate address systems. Jumia has developed innovative last-mile delivery solutions, including partnerships with local logistics providers and the use of technology like mapping systems and GPS tracking. These initiatives help optimise last-mile delivery, improve efficiency, and ensure prompt delivery to customers' doorsteps.”
Africa comprises diverse countries with varying regulations, customs processes, and languages. Blas pointed out that navigating the complexities of cross-border logistics and compliance can be daunting for shippers.
“Jumia's extensive experience in operating across multiple African countries enables it to navigate these challenges effectively. The company has established partnerships and developed streamlined processes to facilitate cross-border logistics and ensure compliance with local regulations,” she said.
On the same line, Tempest noted that the biggest challenge in doing cross-border e-commerce business in Africa is customs facilitation. “Even though we have smart contracts with blockchain and e-documentation, which are very efficient and seamless, when it comes to the frontiers, officials many times want to see the physical documents. A document sent by email is not enough. This delays things very much,” he said.
In Africa, shippers often face payment and fraud risks when operating in the African e-commerce market. Blas noted that Jumia addresses this by providing a secure payment platform, JumiaPay, which offers secure online transactions and protects against fraud. “By leveraging JumiaPay, shippers can mitigate payment risks and ensure a trustworthy and reliable payment system for their transactions,” she said.
While e-commerce in Africa has made significant progress in enhancing customer experience, there are still a few drawbacks that can impact the overall customer journey.
For instance, while mentioning the challenges of delivery delays and security concerns, Blas noted that by actively addressing these drawbacks, e-commerce platforms can improve the overall customer experience.
Meanwhile, Chokshi said, “Modern consumers want to know where their orders are, who is delivering them and the exact ETA of the delivery. They want their favourite brands to recommend delivery time slots that suit them. At the same time, end customers are increasingly looking for flexible and digital payment options. Even when it comes to after-sales services, like the installation of home goods items, customers want a quick resolution. Logistics stakeholders need to digitise and automate their daily delivery processes to deliver on these rapidly evolving customer expectations.”
Investing in Africa
Even though there are mounting challenges, Blas reported that the current mood of investing in the African e-commerce logistics industry is highly optimistic and promising. “Investors are increasingly recognizing the immense growth potential of the African market and the opportunities presented by the e-commerce and logistics sectors. Several factors contribute to the positive investment sentiment including the rapidly expanding e-commerce market, favourable demographic trends, infrastructure development, growing investor confidence and supportive government policies,” she said.
She added, “With the right investments and partnerships, the industry has the potential to drive economic development, employment opportunities, and technological advancements across the continent.”
Chokshi also thinks that the need to rapidly digitise supply chain processes to build resiliency and reduce overall logistics costs will further generate massive investment opportunities in Africa.
“The greater need for integrated logistics services, increasing demand for online deliveries powered by growth in the e-commerce sector and the need to improve transportation infrastructure as aimed by Africa Continental Free Trade Area (AfCFTA) will attract significant investments from both public and private entities,” he said.
Meanwhile, Tempest reminded that investments will only happen if there is solid research done on the market. He said, “We try to encourage better research. If you have independent research or at least by the government, it is very much better to attract investments. If investors don't see research, then they start not to be very interested in investing.”
The African continent has a big untapped potential while looking from the e-commerce logistics point of view. However, there are many things to get corrected and transformed, particularly the logistics infrastructure that supports it. Even though it is all positive news that we hear from the stakeholders there is a lot to be done on the ground both on physical infrastructure as well as digital. However, doing research and keeping customer experience at the centre is the key to finding the right solutions.
This feature was originally published in the July - August 2023 issue of Logistics Update Africa