FROM MAGAZINE: Steering e-commerce with better logistics

While the African continent has enormous opportunities for online retailers, there are still a number of hurdles that hinder economic growth. However, recent capital injections by multinational companies into Nigeria’s e-commerce scene and infrastructure are clear signs that prospects in this sector are improving.

Surya Kannoth

During his recent visit to Kigali, Chinese business magnate Jack Ma promised to market Kenya during his tours around the world. “Will I be the ambassador of African industry and bring more Chinese manufacturing companies here? This is my honour. I will be happy to do that,” said Ma, the executive chairman of the Chinese e-commerce giant Alibaba Group.

This just speaks volumes of Africa’s massive but largely unexplored potential. “Introducing Africa to the rest of the world, instead of just introducing Chinese products to Africa, is something I want to do,” he added.

The big investors in the African e-commerce sector include: African Internet Group, Naspers (co-investors with Kinnevik in Nigeria’s Konga), Swiss-owned Ringier, Casino (a French company with e-commerce platforms in Cote d’Ivoire and Cameroon) and One Media Africa (backed by Tiger Global).

E-commerce websites have been mushrooming aplenty catering to a wide variety of products right from fast moving goods to vehicles to online restaurant bookings that have kept the online space buzzing with activity. According to a recent report by London based Economist Intelligence Unit (EIU), Jumia, Konga and Jiji, which command a lion’s share of the continent’s e-commerce business have the potential to boost Africa’s growth of online, technology based retail business. Other websites such as Mama Mike, Cheki, Kilimall, Rupu, Eatout, OLX and Buy Rent Kenya are ruling the roost and continue to attract buyers who choose to make purchases at the click of a button. The report, which highlighted countries and metro regions in Africa with the biggest potential for e-commerce growth, as well as the trends and developments in the market, valued Jumia at $1billion - the company currently operates in 10 other African countries. The growing appetite for mobile data usage as well as increased network coverage has further bettered the potential of Nigeria’s e-commerce market.

“Business on the African continent is becoming far more e-commerce savvy. This is reflected in the changing purchasing habits whereby online sales have grown substantially in the past five years. The future is definitely moving from B2B to B2C,” emphasises Paul Lawrence, managing director, Tigers South Africa.

Tigers South Africa is a subsidiary of Hong Kong-headquartered logistics firm Tigers. The company launched its first ‘eShop’ earlier this year (in China and Malaysia at the moment with South Africa scheduled for Q1 2018), which will allow access for global brands to the African continent offering Direct 2 Consumer fulfilment opening up markets that were never available through traditional trading models and platforms.

Battling logistics woes
E-retailors are now working to adapt supply chain models from other regions to the complex and vastly contrasting challenges Africa poses. As they do, many e-merchants are striking partnerships with logistics experts whose experience and insight in Africa help avoid errors early on that could undermine future activity.

According to Knight Frank estimates, the warehousing and logistics sector in Africa has catapulted 24 per cent over the past 10 years thanks to the growing shift towards e-commerce. While customer service and timely delivery of goods are the pre-requisites for the success of any e-commerce initiative, poor transport infrastructure and traffic congestion remain a key area of concern for the portals as well as the logistics companies that they have partnered with for deliveries.

“The cost of moving goods in Africa is, on average, estimated to be two or three times higher than in developed countries and transport costs can represent as much as 50-75 per cent of the retail price of goods,” the report said.

Tigers has heavily invested in key hubs and facilities in the major centres to allow direct and cross border fulfilment for brands looking to enter the African e-commerce markets. “With our proprietary SmartHub technology, Tigers ensures “any to any” system integration and Big Data collection to manage and filter purchase requirements and market needs. Key to the African market is to manage the requirements of every market and IT is critical to filter requirements and manage orders. We are able to interface and integrate directly into our clients systems and give them full visibility of their products and any movements of those products through our client portal,” said Lawrence.

With logistics being one of the major hurdles of ecommerce, Jumia decided to create its own fleet of delivery trucks rather than relying entirely on different logistics partners. Their goal was to reduce the geographical fragmentation of the continent and cover a wide territory. Today, Jumia has a massive fleet spread across 12 countries: Algeria, Angola, Cameroon, Egypt, Ivory Coast, Ghana, Kenya, Morocco, Nigeria, Senegal, Uganda, Tanzania. The company also uses couriers in big cities like Lagos. Jumia also offers several alternative delivery options, including click and collect, and delivery through a few select delivery partners. Their long term goal though, is to mainly use their own delivery network.

Meanwhile, one of Nigeria’s biggest online mall Konga has also built its own logistics network called KOS. It has a fleet of over 200 vehicles, which comprises of vans, trucks and motorcycles. These value-driven assets are complimented by the many pickup points and distribution centres located in every region of Nigeria. In an attempt to empower sellers and partners, Konga launched its “self-fulfill” delivery model in 2015.

The new delivery model was designed with merchants in mind, enabling the sellers operating on the website to deliver any item that a customer purchased directly to them. Konga has also implemented a same-day delivery service available to all of its customers living within the boundaries of Lagos. KOS logistics also began offering shipping services to businesses other than Konga, which are offered at very affordable rates.

It has also launched an ambitious warehouse infrastructure project called Fulfilled by Konga, aimed at fixing some of the country’s most persistent infrastructure problems. As part of the initiative, Konga is set to double the size of its main distribution centre in Lagos to 120,000 sq ft in 2017 and embark on a country-wide scheme to build fulfilment centres in Abuja and Port Harcourt.

Cross-border e-commerce gets a boost
Cross border e-commerce is now gaining momentum so is the ability to fulfill from a central hub to multiple countries on a B2B and B2C basis. However, underdeveloped logistics systems prevent the expansion of cross-border e-commerce which requires extended supply chains as well as complicated procedures such as customs formalities, commodity inspection, cross-border logistics and delivery, which increase transaction costs.

 “We are able to service this from an omni-channel stock holding from one of our bonded facilities in South Africa, allowing the stock to be held in bond with fulfilment being directly from bond to multiple African countries, allowing the products to be closer to the markets they service with fast turn-around times on delivery and no outlays of government taxes and customs duties,” Lawrence said.

In a recent development, Nigeria-based MallforAfrica (MFA) got a big boost when the American-based e-commerce giant eBay agreed to partner with the Nigerian enterprise. With this agreement, western consumers can order purely African-made goods - arts, crafts, items of clothing, etc. - online from eBay with MFA as the “middle man,” by ordering via MalforAfrica.com. On the flip side, beginning from last year, Africans in Africa could access over a billion eBay listings worldwide, with items that include clothing, electronics, sporting goods, toys, household goods, books, jewelry, parts & accessories. Africans ordering goods from the US and UK can use ebayforafrica.com. In either direction, MFA serves as the middle-man.

Americans can now buy African goods on eBay through the company’s partnership with MallforAfrica.com. Products from vetted vendors in five African countries - Nigeria, Kenya, Ghana, South Africa, and Burundi - are available on eBay’s US shopping site. MallforAfrica selects the African retailers and handles payments on its platform. DHL is their shipping partner.

Thrust on better technology and infrastructure
While road and rail infrastructure still pose a problem for e-commerce deliveries, e-commerce companies are exploring innovative and technological advanced techniques to reach out to their customers. Creative solutions, like using drones to make deliveries, can be found throughout the continent, but there is yet to be a development that addresses fundamental infrastructure gaps.

Among some of the recent developments has been the partnering of Nigerian Post (NIPOST) with London-based logistics technology start-up What3words. What3words, which aims to remap the globe, looks to implement “three-word addresses” to expand door-to-door delivery. In the What3words app and online map, the world is demarcated into three-metre-by-three-metre squares — each with its a unique three-word designation. Instead of delivering according to street signs and numbers, which may or may not exist, couriers locate the destination of a package according to those three key words. Ultimately, What3words hopes to extend door-to-door delivery to 70 percent of the population in the next two years, and 90 percent by 2020.

“With a rapidly growing e-commerce ecosystem, Nigeria is a very exciting country to be working with,” said Chris Sheldrick, CEO and co-founder of What3words in a press statement. “Postal services have a critical role in building a strong economy and NIPOST are firmly focused on the future, and are taking steps to modernise and grow their capacity and range of services.”

If NIPOST’s delivery range and rate vastly improves, it could prove timely given Nigeria’s growing e-commerce industry. With these companies unable to depend on the national post service in the past, they resorted to setting up in-house delivery companies.

But NIPOST will be hoping that by leveraging technology to boost its efficiency, it can become a viable delivery option for e-commerce companies.

Recent capital injections by multinational companies into Africa’s e-commerce scene signal that prospects in this sector are improving. These investments also provide vital funds for capital-intensive activities, like infrastructure development. While e-commerce companies may not find it easy to overcome all the logistical hurdles, technological innovations and further investments in infrastructure may help levitate the industry further. One thing is certain – there is a flipside to all the challenges mentioned above, those entrepreneurs who manage them successfully will be definitely be laughing their way to the bank.