Less than 30% of African e-commerce start-ups are profitable because companies face problems such as lack of funding, lack of trust and logistical difficulties. This is what the Afri-Shopping report reveals: Exploring the African E-commerce Startup Ecosystem Report 2017 published by Disrupt Africa.
The report finds that the African e-commerce market is growing at an extraordinary rate, with the number of startups entering the market increasing year by year to a total of 264 companies operating across the continent.
Yet less than 30 percent of startups surveyed for the research said they were profitable, while funding for e-commerce start-ups was also inconsistent as investors were frightened by the long wait for returns.
Funding for e-commerce startups dropped sharply in 2016 and, although investors are still showing interest in 2017, available funding is not well distributed, with 90% of the funds raised going to start-ups in five countries only. Nigeria is emerging as an undisputed leader in e-commerce on the continent, with 40% of e-commerce companies in Africa located in the country.
The report also analyzes e-commerce activity in 19 other African markets. “It is obviously a big trend to launch e-commerce start-ups in Africa, with emerging platforms in a variety of niches across the continent.” The opportunities in the online retail sector are clearly huge, but these companies also face enormous challenges, “said Disrupt Africa co-founder Tom Jackson.
The dominance of African e-commerce by Nigeria is one of the most interesting conclusions of this report. For the first time, we have accurate e-commerce data in the region.
While South Africa and Kenya are traditional leaders in terms of technology entrepreneurship, this study clearly shows that Nigeria is about to build big success in the field and will be ranked as the first African country performing online sales, according to Gabriella Mulligan, co-founder of Disrupt Africa.