Beyond Borders: The role of mobile in Africa’s retail economy
Author: Craig Page-Lee (@cpl_ignite )
While only a relatively small percentage of South Africa’s population makes purchases via their mobile phones — at this stage — the reality is that this growing segment will eventually present a major challenge for the bricks-and-mortar retail sector, not just here but also in the rest of Africa.
The potential for a growing online retail sector on the continent will surely become a reality in our lifetime. What will this mean for informal traders? What is the power of mobile’s role in helping build the formal retail sector, defined by the ever-increasing number of new bricks-and-mortar retail environments rolling out across Africa, and what are the opportunities for online and informal traders?
Even greater opportunities
While we may think that tech and mobile may only benefit the formal retail sector, the expected growth in online purchases may actually present even greater opportunities for the informal traders, especially as they’re much closer to consumers and are still a cheaper route to market for many products and brands.
With a population of about 51m people1 and with 89% (>45m people) owning a mobile phone, SA is ranked no. 28 on the “List of Countries by Number of Mobile Phones in Use”2. It is further reported that just over 40% of the population owns a smartphone (>21m), close to 60% owns a feature-phone, and that there are over 63m mobile handsets in use, giving SA a mobile penetration of about 130%. With over 15m Internet users in SA3, more than half (57%4) of SA’s internet traffic comes from mobile phone users, reportedly. If every one of those smartphone users makes only one m-commerce transaction a year (applying an average transaction value of just R50 per user, per year), that equates to almost R1bn in value for retailers in SA — the potential for m-commerce within SA alone is beyond question.
While it’s easy to say that there is little, or no, threat to bricks-and-mortar retailers as online shopping still only accounts for just over 1% of total retail spend in SA, the SA marketplace has a number of effective and well-supported online retail sites focusing upon fashion, home and lifestyle products (eg superbalist.com), and covering a broad range of everything (egtakealot.com). In Nigeria, we see the likes of jumia.com.ng, a successful online retailer that has become the leader of e-commerce on the continent. All of these have the capacity to present themselves as real challengers to established FMCG and fashion retailers.
Same online approach
Not only that, what with the influx of a multitude of international fashion retailers into SA (all with equally effective digital shopfronts in their respective home-base locations), we will see the same online approach being adopted to support their SA offerings.
Nevertheless, I genuinely believe that the biggest opportunity exists for the informal traders of Africa.
First, consider the number of clients or customers these traders have each day and, secondly, consider the relationships these traders build over time with their customers — especially those that have regular travel journeys and shopping habits.
With a lower cost of data and the rapidly increasing adoption of mobile banking platforms outside the borders of SA, the opportunity exists to convert traditional informal retailing practice into an online-led engagement and retailing behavior. Imagine the scenario where a consumer can message the informal trader or street vendor, place an order and collect on the way home — irrespective of the products being sold?
How it could play out
This is how it could play out:
The trader or street vendor is able to message the “opt-in” groups and advise on fresh stock delivery — even with images. Consumers can place their orders, make payment via the likes of M-Pesa and advise the retailer or street vendor upon expected arrival time. The packages can then be made up for collection by the consumers on their journey through the day. By building a contact list (on mobile database) of opt-in consumers, the retailer or street vendor is one step closer to the development of a loyalty programme and is able to select the best products to be put aside for the loyal, supporting customer.
The limitations for such a simple platform are, however, very similar to high-end m-commerce transactions, those being;
- Mobile-handset screen size, resolution and navigation capability
- Network capability and cost to use — as many consumers are cash-strapped across Africa. The cost of conducting m-commerce impacts directly upon the amount of products and services that may be purchased
More successful
In a way, m-commerce in other parts of Africa could actually become more successful and more broadly used than in SA, considering the ease and frequency of use of online payment gateways. This should apply to feature phones as well.
But are we being too ambitious in our thinking on the power of mobile as a retail channel on the content and, if so, how long before we see greater adoption and ubiquitous engagement in m-commerce across sub-Saharan Africa?
A recent Millward Brown Digital Survey (2015) determined that close to 80% of US marketers confirmed that they would increase spending on mobile as a channel if they could track ROI better. With the ever-increasing number of mobile users in Africa, this presents a huge opportunity for brands to exploit this ubiquitous channel. Going beyond simple mobile measurement in Africa remains a challenge, though, as marketers target people predominantly.
Must for marketers
Understanding consumer behavior, especially within the informal sector, and how the brand conversation flows seamlessly across devices are a must for marketers as they strive to develop a deeper understanding of this broad and complex mix of consumers. Surely formalising ways of capturing data (via mobile platforms) in the informal sector will bring greater value to any brand than ever before?
In closing, and to paraphrase a quote from PayGate CEO, Peter Harvey, as the world of e-commerce grows in Africa, growth will come from young startups and innovation from niche players. I hope that the VC funders and traditional retailers are ready to invest in the next generation of retail on the African continent — through the mobile phone.
Source: Marklives.com