Jumping Africa’s e-commerce hurdles
Building a customer base of 1-million strong isn’t a mere fantasy for African online businesses – so long as they can seize the opportunities presented by three e-commerce challenges, writes Frost & Sullivan’s Wesley Maraire.
African consumers have a deep mistrust in e-commerce. This is primarily due to the fact that inherent challenges did not exist prior to the emergence of e-commerce.
Firstly, Brick and mortar stores traditionally provide face-to-face interaction in-store, as well as at point of sale (POS), where customers purchase by means of cash.
Secondly, in addition to the absence of human contact, e-commerce companies face the challenge of choosing between two primary retail strategies; either increasing revenue or decreasing costs.
The emergence of the Internet revolution in Africa over the last decade has led to 16 percent of the 1 billion population gaining access to the internet. This has precipitated the emergence of e-commerce in Africa, which is projected to grow by 40 percent annually over the next ten years.
Companies not recognising the need to migrate to some form of online system that pays particular attention to the customer, may well be left behind.
There are three ways to turn these challenges into opportunities, all of which focus on the customer.
- Overcoming the trade-off between quality products and competitive pricing.
- Addressing the challenge of satisfying the rising service expectations of online shoppers through offering a seamless service experience.
- Building long lasting relationships between the company and its customers, which will sustain the business throughout its lifecycle.
These three strategies are juxtaposed with relevant case studies that illustrate the empirical impact of successfully implementing such disruptive strategies.
The e-commerce industry is in its nascent stage in Africa, as technological sophistication on the continent has lagged behind the rest of the world due to the late adoption of the Internet.
The majority of e-commerce websites share similar functions, features and strong back-end systems. Nevertheless, the real differences between the companies are revealed by the best practices companies employ in response to customer mistrust of e-commerce.
Companies that will survive in the industry, sustain the business, and become profitable, need to execute strategies around three key customer centered areas.
These are critical to sustain a profitable retail e-commerce business and provide better and differentiated offerings; namely: quality products at competitive prices, a seamless service experience, and disruptive relationship building strategies.
Price is an important factor
1. Quality Products at Competitive Prices
Modern African consumers from the middle and upper-classes constitute 35 percent of the African population. These consumers are exposed to global product and service standards, which has raised expectations of their online shopping experience to international standards.
The products offered by online stores, therefore, need to be of premium quality, maintaining competitive prices when compared to similar offerings from those of competitors and traditional brick and mortar stores.
In essence, the product offering has to differentiate a company from its rivals by adding value to consumers; thus, following the decreasing prices retail strategy and winning the price war.
The consumer will purchase premium products online at a lower price than that offered by brick and mortar stores because e-commerce companies have less operational costs. An example of a best practice is the proactive approach to lowering prices adopted by Menaclick in Morocco.
The company diverged from the conventional sourcing of products from wholesalers or manufacturers, storing them in a warehouse and then shipping these to customers.
Menaclick, instead, employs sales agents who actively negotiate product prices with merchants to whom they provide access to the virtual mall interface (Hmall). This move has seen the company offering top quality products at the lowest prices in Morocco.
Furthermore, the company offers higher-purchase as a payment option to customers so they can pay for products over 12 months, interest free.
The company remains ahead of the competitive curve due to its price leadership in the market. Such proactive strategies prove to be effective cost cutting measures for customers who, in turn, are able to purchase more from the company.
Consumers expect excellent customer service
2. Seamless Service Experience
Profitable e-commerce businesses in Africa offer excellent customer service; those that thrive offer a differentiated service experience to customers. The customer’s experience with the e-commerce website should be streamlined and seamless, from the customer’s first visit to the webpage right through to the check-out point. Customers in Africa are apprehensive about online shopping.
It is therefore essential to follow up the purchase with a ‘customer care’ phone call in order to confirm the order and assure the customer that the purchase has beenp rocessed, as well as explain the turn-around time.
Furthermore, an optimal solution to enhance customer satisfaction, such as an online chat system, is a value-add in Africa because it is a cost effective way of communicating, now that more Africans are gaining access to internet services. Such support capabilities assist companies in addressing the absence of human contact challenge, and bridges the gap between virtual and brick and mortar stores.
Companies implementing innovative strategies centered on seamless service experience will exceed ever-rising customer expectations and be sustainable and profitable in the e-commerce lifecycle.
In Nigeria, the company Konga has employed its own delivery team in major cities such as Lagos, where it uses motorcycles to avoid congestion caused by high traffic volumes. Konga has partnerships with logistics companies, such as DHL and UPS, to deliver orders to all areas in Nigeria.
The trucks are installed with a more efficient GPS tracking system that is synchronised with the Konga website to allow real-time package tracking, whereas the old system could only display the last dispatch location. In addition, the new system adds flexibility as it allows customers to re-route orders in transit due to the real-time package tracking.
These disruptive strategies have enabled Konga to gain a customer base of approximately 1 million within the first year of launching. Furthermore, it is essential to establish a feedback mechanism to make it easy for customers to communicate with the company.
With every customer care phone call received, Konga follows up via email to confirm if the query has been resolved, and this feedback mechanism is a big component of the company’s key performance indicators (KPIs). Konga is a yardstick of African e-commerce companies that communicates a promise of excellence and then delivers on this promise.
Yuppiechef takes a personal approach to retail, adding to its many successes
3. Relationship Building
In Africa, as in developed economies, more power has shifted to the customer to determine the success of an e-commerce company, and is more often beyond the control of the brand.
Companies have to provide a superior level of satisfaction among existing and potential customers in order to increase their bottom line. E-commerce businesses have to develop marketing and product positioning strategies that create a sense of ownership pride amongst customers. Deeper loyalty in the brand ensures customers continuously return to the website and purchase more products because they identify with the brand.
Companies that will gain a competitive advantage in the e-commerce industry will pay particular attention to relationship building elements such as loyalty programmes, as well as pre-launch offers for products.
Costplays a major role in a customer’s decision to purchase from an online store and combining better pricing, quality products, and a seamless service experience, together with relationship building elements, will produce insurmountable benefits for companies.
A relevant example of this is the disruptive after sales service approach taken by South African home and kitchenware store, Yuppiechef. The company employs staff whose exclusive function is to write thank you notes to customers for every purchase made. This approach adds a human element that consumers yearn for.
Between 2007 and 2011, Yuppiechef experienced a growth rate of 300 percent and has achieved a year-on-year growth rate of 100 percent. This may be attributed to the fact that its strategies have resonated well with its customers who relate closely to the sense of community.
It has also introduced other game-changing initiatives such as its online reality TV show (The Art of Baking) that features celebrity chefs such as Sarah Graham.
Yuppiechef has developed into a Mecca for people who love high quality products. An impressive 60 percent of its customers are repeat buyers, which is above the industry average of 50 percent in South Africa.
e-commerce is growing in Africa at a rate expected to be at over 40% annually
Conclusion and Recommendations
The increasing internet penetration rate in Africa of 16 percent has assisted the rapid growth of the e-commerce industry, which will continue to grow in the future at 40 percent annually. The industry is customer-centric because it revolves around meeting customer needs.
In line with the three strategies listed in this insight, the industry is heading towards strategic branding innovations that foster customer loyalty through exceeding customer expectations throughout the entire fulfillment cycle.
Consistency of service is, therefore, essential and partnering companies such as logistics need to uphold the brand image as well.
When customers receive and open a package, they should feel and experience the same level of service they would feel when purchasing in-store with the assistance of sales staff and POS. Overcoming customer mistrust in e-commerce is critical for any company that will be sustainable and profitable in Africa.
In essence, if companies are not innovating and successfully implementing disruptive strategies centered on the customer, they will be left behind on the competitive curve.
By Wesley Maraire, Support Group Leader for Best Practices at Growth Consulting firm, Frost & Sullivan.
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