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SPENDING POWER

Online spending in Africa shows just how much work e-commerce companies still have to do

Reuters/Luc Gnago
Jumia is the largest e-commerce operator across Africa.
  • Yomi Kazeem
By Yomi Kazeem

Africa reporter

In the early 2010s, African tech ecosystems were defined by the promise of e-commerce with a simple mission: getting hundreds of millions of young Africans to make online purchases.

A decade on, the mission still remains a work in progress with question marks lingering around logistics and last mile delivery problems—and that’s reflected in the level of spending among African shoppers.

Across the continent, recently released data shows South African shoppers spent an average of $109 on online purchases on consumer goods—the most among African countries. Despite ranking top on the continent though, South Africa’s spend is still nearly $400 lower than the global average. And, of the 44 countries analyzed in the digital trends report by Hootsuite, the six African countries featured all rank in the bottom 10.

The spending levels reflect the current state of local markets with the continent’s major players still struggling to prove viability. Despite a high-profile IPO on the New York Stock Exchange, Jumia—the largest e-commerce operator on the continent, has quit smaller markets on the continent over the last three months. And, amid an enduring streak of million-dollar losses, the company is now betting on a fintech pivot to drive up revenues in pursuit of elusive profits.

In addition to shoppers in Africa’s developing markets typically having less disposable income for online purchases, the relatively low spending levels also tell the story of how the adoption of e-commerce has been hobbled by infrastructure problems, especially payments. Trust issues also persist as e-commerce operators still maintain cash-on-delivery options as a workaround to ease skepticism and foster trust.

In pursuit of e-commerce success, unorthodox, hyper-local methods have also come under consideration. In Kenya, Copia Global, which raised $26 million last November, is gaining traction by serving unbanked customers in rural areas, allowing them walk into stores of partnered agents who place orders on their behalf, take payments and serve as delivery points.

But overall, investor attention and appetite across the continent has clearly shifted away from e-commerce. The latest annual funding report by Partech Africa shows online commerce platforms received only 6.1% of total funding, far less than dominant fintech startups.

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