(Ecofin Agency) - The African e-commerce market is expected to grow further in the coming years, stimulated by the movement restrictions caused by the Covid-19 pandemic. The decline in financing could lead to consolidations in a very fragmented industry.
From US$7.7 billion and US$28 billion respectively in 2020 and 2021, ecommerce revenues will exceed US$46 billion by 2025, in Africa, according to a TechCabal Insights report published in late 2022.
The report titled "The Future of Commerce: 2023 Trends Report" reveals that the number of online shoppers on the continent is expected to exceed 500 million by 2025 compared to about 139 million in 2017.
With sales growing from US$8.2 billion in 2021 to US$13.4 billion in 2025, the fashion segment will drive e-commerce revenue growth on the continent over the next few years.
The segment will be followed by electronics & media, which will reach US$11.2 billion in sales in 2025 compared to US$7.5 billion in 2021. Then will come the toys & leisure, furniture & appliances, and food & personal care segments.
TechCabal Insights also points out that several African e-commerce start-ups such as Konga, Jumia, and Takealot, will face stiff competition starting in 2023, with Amazon (which sold US$500 billion in 2021), deciding to launch its e-commerce platform in Nigeria and South Africa this year.
Mergers and acquisitions expected
International payment platforms like Google Pay and Apple Pay are also expected to enter new African markets while many African banks will launch specialized payment service platforms as several Nigerian banks have already done.
The report further estimates that tough economic conditions will force e-commerce start-ups, especially those operating in business-to-business (B2B) online sales, to cut costs and explore additional revenue streams in 2023, including importing goods without intermediaries, buying directly from producers, building their own brands, and diversifying payment options by adding credit options such as the "buy now, pay later" model.
Mergers and acquisitions between e-commerce start-ups could also explode this year, mainly due to the excessive fragmentation of the sector. "In 2023, many M&A deals will happen. Again, the economic downturn will lead to many players being unable to raise funds and getting closer to other players. We will see many consolidations in various regions of the globe. To become profitable, a B2B e-commerce startup needs scale. The higher its buying, the more leverage it has on suppliers, and the better it can negotiate distribution margins et payment terms. Players will have to team up to reach the needed size to survive," says Ismael Belkhayat Founder and CEO of Moroccan e-commerce platform Chari.