Peter Allerstorfer is the co-founder of Silvertree Capital, a company that holds controlling or strategic stakes in African internet companies, targeting Africa’s surging consumer class. In this guest post, he gives 5 reasons why retailers struggle to move online.
The internet has proven a dynamic tool for stimulating economic growth in developing countries. This has been proven by a World Bank report stating that a 10% increase in broadband has correlated to a 1.38% in GDP growth1. This further explains why investors are a-buzz over countries like Kenya and Nigeria, within the African continent, whose internet penetration is constantly on the rise. From an investor’s point of view, if the internet is to achieve the same kind of scale and impact as the spread of mobile phones did, in Africa, iGDP could account for as much as 10% (USD 300bn) of total GDP, while producing a leap forward in economic and social development. This is great news for the African continent!
Along with internet penetration comes the introduction of e-commerce. According to Peter Allerstorfer, co-founder of Silvertree Capital, e-commerce will soon open up a new shopping experience for Africa’s growing middle class. Peter states that, by 2025, online retail could account for 10% of retail sales within the continent’s largest economies, which will translate into some USD 75bn in annual revenue. Despite these exciting prospects, however, many e-commerce Sites are finding it tough to operate within the African online climate. The following five points offer reasons, according to Peter, as to why retailers struggle to move online.
- The Right Resources
E-commerce requires the following resources in order to get it right:
- The sourcing of products
- Quality control, a studio and warehouse
- Online marketing
- An online shop
- Picking and packing
- A third-party logistics provider
- Customer care
“72% of consumers state that if Website performance is poor, they are unlikely to complete their transaction.”
- Strategic Gaps
These have been found to appear in implementation, content management, and transactional processes. In general, there seems to be a poor awareness of best practices when it comes to Website strategy.
- Walking Out
A good customer experience, within e-commerce, is absolutely vital. This is due to the fact that it is so easy and convenient for viewers/users to ‘leave’ – as opposed to walking out of a store front that is. Abandoned (online) baskets are a widespread, unfortunate phenomenon among online retailers; mainly causes by the, often unavoidable, complexity of transactional processes.
“68% of consumers say that if a Website performs badly or does not match their expectations, they will use an alternative Site.”
- Inability to Monitor Data
Many online retail companies lack knowledge on how to monitor the data available that tracks the behaviour of their customers. They struggle to make this information meaningful in order to bring about improvement. In line with this, retailers are unable to pinpoint problems, solve them quickly, and proactively manage their online service.
- Lack of Competition
Many retailers do not see a priority to move online due to the lack of competition in the online retail market. Merchandisers, in Africa, could not be bothered to go to all the effort of setting up shop online, when their storefront shop is performing perfectly well and the return on investment is more predictable. This is expected to change soon, however, as online retail competition increases due to the likes of TakeALot.com, Zando, and potential players, like Amazon, entering the market with local distribution.
“Although 15% of the world’s population lives in Sub-Saharan Africa, only 6% of the world’s internet users do.”
With the need to obtain the right resources, overcome strategic gaps, prevent a high bounce rate, monitor data and rise above the lack of competition within the online retail market in Africa, moving online does seem like a struggle indeed. Which is why holding companies like Silvertree Capital offer their services to online start-ups in Africa.
