According to the company’s website news release on February 16, 2023, at the height of the COVID-19 pandemic, Africa's market experienced significant volatility, supply chain constraints - particularly for imported goods - and movement restrictions put a halt to business-as-usual prompting suppliers to change strategy. Despite having been present on the continent for quite some time, ecommerce was given a chance to shine by filling some of the gaps left by pandemic-induced limitations.
Growth of e ecommerce companies in Africa
Since first starting out in the late 1990s, online marketplaces in Africa have come a long way. Analysts at Statista expect the sector of ecommerce companies in Africa to show a compound annual growth rate (CAGR) of 13.9% between 2023 and 2027 – a projected market volume of USD 82.49 billion by 2027. This astronomical growth has been supported by considerable investment in Africa’s digital infrastructure as the continent builds towards a digital economy.
Key among the factors that have enabled growth of ecommerce companies in Africa is the increase in internet penetration. Africa has seen the fastest growth in the number of people using the internet, from 1% in the world to just below 30% in 2020, according to data from the World Bank. The International Telecommunication Union (ITU) estimates that by 2021, penetration stood at 33%, with significant growth witnessed during the pandemic period.
The COVID-19 pandemic further accelerated adoption of ecommerce as demand for services to help deal with lockdowns grew. UNCTAD reported that some platforms saw growth of up to 50% in the volume of transactions within the first six months of 2020.
Digitalisation is central to visibility and agility
The growth of ecommerce companies in Africa can teach FMCG companies several lessons. The first being that visibility requires digitalisation. To get goods from production to retail, modern supply chains have multiple interconnected facets working in tandem. Because everything is interconnected, a single issue can have far-reaching consequences.
Digital and data driven supply chains facilitates the identification of potential weaknesses and areas of improvement within a supply chain, resulting in increased efficiency and improved service delivery. As a driver of improved agility, digitalisation empowers businesses to better control and to rapidly react to transportation disruptions and to dynamic inventory requirements based on demand fluctuations. The increased visibility in digital supply chains also significantly improves a business’s ability to provide a better customer experience for their clientele.
Ecommerce players demonstrated their agility by leveraging their digital capabilities to track and respond to consumer needs. According to a 2021 UNCTAD report, at the height of the pandemic, demand for groceries and personal care products increased. With access to high-quality, near-real-time data, ecommerce companies in Africa were able to pivot to meet demand, but they were also met with manufacturer-side shortages.
Pursuing integrated logistics to reduce supply chain links
Even in the aftermath of the pandemic, ecommerce companies in Africa maintain simplified supply chains that allow greater end-to-end visibility, allowing for greater agility and flexibility. In some cases, the integrated nature of last-mile delivery for some ecommerce platforms has been so strong that international logistics providers are partnering with them to increase reach and efficiency.
While developing integrated logistics capabilities for themselves will be costly and time-consuming, FMCG companies can pursue partnerships with integrated logistics providers who have the tools and capabilities to support growth ambitions.
Learning from ecommerce for success
Volatility in consumer preferences, economic factors such as inflation, geopolitical uncertainty, and a variety of other factors can all have a significant impact on companies in the sector. Prioritizing mechanisms similar to those used by ecommerce players will allow FMCG companies to improve end-to-end visibility and agility and resilience in the face of unforeseen and unpredictable market disruptions as we have witnessed over the past few years.
