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Africa e-commerce a big fish in small pond

E-commerce is perfectly placed to shape this economic transformation. FILE PHOTO | NMG
E-commerce is perfectly placed to shape this economic transformation. FILE PHOTO | NMG 

Context has become the new source of wealth in the world and context-based engine companies have risen from nothing to become multi-billion dollar behemoths.

Taxi technology company Uber, although until recently owned no cars, is worth more than Volkswagen. Airbnb, which simply matches people needing rooms with those who have no rooms, is worth more than Hilton Hotels.

Alibaba, which hosts more than eight million online entrepreneurs of which 62 per cent are small and medium enterprises (SMEs), is worth more than the GDP of the East African Community(EAC) and Southern African Development Community (SADC) countries combined.

Though these companies may seem to be technology-enabled business model innovations, the unique and outstanding thing about them is that they have simply developed a context-based economy by providing needed information from an end-to-end user and be able to create wealth.

Surprisingly, e-commerce context engine companies like eBay, Amazon and Alibaba are yet to make a big entry into the African market and a number of African e-commerce platforms have been taunted as the next Amazon and Alibaba.

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With the rapid spread of mobile phone use as well as increased internet coverage and adoption of digital payments especially mobile money in Africa, it’s easy to integrate e-commerce platforms.

And Safaricom is one of the new entrants in the market launching its own e-commerce platform, Masoko, aiming to leverage through its telecommunication infrastructure.

But is Africa’s Alibaba or Amazon residing among these numerous e-commerce platforms coming up?

Unfortunately, our current e-commerce platforms are big fishes in a small pond vertically integrated primarily in the retail trade of fast selling electronics, smartphones and mobile accessories which possess razor-thin margins and a slight shock can possibly wipe them out of the market.

For Africa’s e-commerce platforms to establish a context-based economy, the bigger picture should be to mainly reorganise small firms especially in the rural ones by scaling up through online platforms in a cross-continental trade.

For example, soap stone carvers in Kisii County through an online platform should be able to access clients not only in Nairobi but in other African cities like Durban, whilst furniture vendors in Kumasi, Ghana, should be able to access clients in Nairobi. A Nigerian fashion and apparel designer should also access clients in Luanda or Kigali.

This therefore means that success of e-commerce is not only built on fast rising internet coverage but equally due to skilled entrepreneurship aided by a very good logistics network that will help deepen markets and increase extensive margin of trade.

In order to experience this transformation, e-commerce platforms will have to horizontally integrate themselves in the retail trade market more focused in a rural expansion strategy and China provides detailed lessons.

According to AliResearch, Alibaba Group’s research arm, at least 10 per cent of Chinese village households today actively engage in e-commerce or at least 100 active online shops have been opened by village.

Hundreds of thousands of rural Chinese have launched their own businesses and producing goods to sell on online platforms and as more and more people launch their own e-business entire villages began reorganising local economies around e-commerce.

The advent of online platforms has stimulated growth of rural business and has altered the way Chinese citizen consume and produce.

So as Africa’s shared vision of its future economic growth is deepening markets through trade, e-commerce is perfectly placed to shape this economic transformation.

As Alibaba founder Jack Ma once commented in 2005, “eBay may be a shark in the ocean, but I am a crocodile in the river. If we fight in the ocean, we lose – but if we fight in the river, we win”

African e-commerce companies should model their platforms on what works for the African consumer and vendor in order to enjoy greater economies of scale of a context-based engine company.

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