What should I know before starting an e-commerce business?

With internet access fast increasing, bolstered by smartphone ownership, countries across Africa are increasingly ready for e-commerce businesses, and many traditional retailers see growing their online sales as a priority. Within e-commerce there is already a variety of models, from online marketplaces where anyone can sell their goods, to youth-targeted clothing sites.
Google research has shown that even consumers who shop in brick-and-mortar outlets increasingly check product prices online before heading to a store – or check the online price on their phones while instore.

Pinpoint the right payment method
One of the biggest challenges faced by e-commerce retailers in some African countries is a distrust in online payments, and in paying for goods before they arrive and/or consumers can see the quality. Your company may have to rely on cash-on-delivery (COD), which can be risky, both in terms of customers deciding at the last minute not to take the goods, and in terms of the drivers having to carry cash. For this reason, and the fact that in many African countries bank card penetration is low, it may be worthwhile to invest in innovative on-delivery payment systems such as mobile payments.
Raphael Afaedor, CEO of Nigerian online grocery store Supermart, explains how abandoned orders add to the increased costs of COD systems: “Everybody is trying to move away from COD because it has massive operational costs. I will give you an example – about 50% of customers who select COD, do not accept the product when the product is delivered… So about 50% of the deliveries are just dud deliveries. What that means 50% of the time the driver is running around [for nothing, and] costs are significantly higher than they should be.

Consider models that reduce logistical challenges
With heavy traffic, poor roads, and weak address systems, getting the goods to the customer – one of the key advantages online purchasers are paying for – may prove more difficult in some cities. You may also need to invest in dedicated ‘dark stores’ (warehouses dedicated to e-commerce purchases) to cater to demand, if you are a traditional retailer moving into e-commerce.
One of the advantages of a marketplace model that provides a platform for third-party merchants to sell their wares online, is that the company that owns the site has fewer distribution challenges. Sellers are often responsible for their own distribution. It’s worth considering starting a marketplace site for this reason, as Jumia Market MD Sefik Bagdadioglu explains. He says that this method means deliveries can happen more quickly: “Our business model takes away unnecessary delivery from the seller to the warehouse. If it goes straight from the seller, it is actually a lot faster.

Tap into globalised marketing
Some brands have found success in targeting their products at segments of the market that are likely to already be tech-savvy and online-shopping friendly, like the youth. Countries like Kenya and South Africa have highly developed physical retail markets, with urban populations never very far away from stores.
Younger markets may be less habituated to this, and more likely to embrace the variety and novelty of buying online. Consider adding to the shopping experience by putting extra effort in the way goods are packaged and presented, to encourage shoppers to return, and to value receiving delivered goods over the experience of going into a physical store.
Recently, companies like Konga (Nigeria) and Takealot (South Africa) have also started to use retail events from places like the US and UK. A key example of this is Black Friday, where large discounts and promotions are offered on the Friday after Thanksgiving, to kick off the Christmas shopping season.
As more western clothing brands such as H&M and Zara enter African markets, consumers are also getting used to the drastic and frequent sales these brands have, and this is something e-commerce ventures should consider adapting to as well.

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