The business of selling Consumer goods and services online are a relatively young effort in Africa, but e-commerce is booming.
In the last eight years, the sector has seen its first phase of large venture capital funds, start-up duels and attrition.
To date, the expansion of electronic commerce in Africa has crossed the line of challenge and opportunity, perhaps more than any other market in the world. In the major African economies, many of the requirements for online retail (internet access, digital payment adoption and 3PL delivery options) have been very scarce.
Still, the new companies launched into this market to have the opportunity to digitize a portion of Africa's rapidly growing consumer spending, which is expected to exceed $ 2 billion by 2025.
African e-commerce 2.0 will include some old and new players, will be played in more countries, will give more priority to Internet services and will see the entrance of China.
But before highlighting several things to consider in the future of digital retail in the continent, a look back is beneficial.
Jumia vs. Konga
The first years for the development of African online shopping developed largely in Nigeria (and to some extent in South Africa). Anyone who visited Nigeria between 2012 and 2016 probably saw evidence of one of the first e-commerce clashes on the continent. Nigeria had its own duel as Coca-Cola-Pepsi, a race between the Konga and Jumia companies to promote and downgrade each other in a quest to scale online shopping in the largest economy and the most populous nation in Africa.
Traveling in the traffic of Lagos, large advertising posters for each startup faced each other across the horizon, while their delivery motorcycles buzzed among the stopped cars.
Covering each company from the beginning, it looked like a battle of VC wear. The challenge: who could continue to raise enough capital to absorb the losses of capturing and simultaneously create an e-commerce market in notoriously difficult conditions.
In addition to the challenges mentioned above, Nigeria also had (and still has) poor electricity.
Both Konga, founded by Nigerian Sim Shagaya, and Jumia, originally founded by two Nigerians and two French, were forced to burn capital construction compliance operations that most new e-commerce companies supply to third parties.
That included their own delivery and payment services (KongaPay and JumiaPay). In addition to product sales from mobile phones to diapers, both startups also began experimenting with verticals for Internet-based services, such as food delivery and classifieds.
While Jumia and Konga were competing in Nigeria, there was another VC-driven race for e-commerce in South Africa: the second largest and most advanced economy on the continent.
Electronic retailers Takealot and Kalahari had been competing for a market share since 2011 after raising capital in the hundreds of millions of dollars from Naspers investors and the US fund Tiger Global Management.
So how were things in western and southern Africa? In 2014, the main investor of a Kalahari in crisis – Naspers – facilitated a merger with Takealot (which was more an acquisition). They banned the Kalahari brand in 2016 and bought Takelot's largest investor, Tiger Global, in 2018. Takealot is now South Africa's leading e-commerce site by market share, but only operates in one country.
In Nigeria, in 2016 Jumia had surpassed rival Konga in the Alexa ratings (6 vs. 14), while beating Konga (backed by Goldman Sachs) to become the first startup unicorn backed by VC from Africa. In early 2018, Konga was bought in a troubled acquisition and disappeared as a competitor of Jumia.
Jumia expanded the verticals of goods and services online to 14 countries in Africa (although recently out of some) and in April 2019 raised more than $ 200 million in a NYSE IPO, the first in a major exchange for a startup backed by Venture capital operating in Africa.
Jumia has had a bumpy road since it was made public, losing significant stock value after a short sale attack in early 2019, but the main e-commerce company of the continent still has a lot of capital and generates $ 100 million in revenue (even with losses).