The #Afrikoin conference is organized and hosted by iHub, Kenya’s famous and main innovation platform for web technologies. Their research arm, iHub Research, gave us a few insights on a research they have been running in East Africa (Kenya, Tanzania, Uganda) on e-commerce.

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The first e-commerce ventures in East Africa used to focus on affluent costumers and the diaspora, with payment by credit cards, mostly in the travel and gifting industry, with startups such as TravelStart or MamaMikes, but the landscape is changing fast with mobile money and mpesa.

East African E-commerce research findings

The purpose of the study was to find out:

  • Who are the consumers using e-commerce in East Africa?
  • What are the products bought by these customers?
  • What are the businesses present in the e-commerce field?
  • What are the channels where products can be found?
  • How is payment done?

The survey was run for one month on Binu, a platform that facilitates opinion research on mobile. 538 panelists answered the set of questions designed by iHub researchers Leonida Mutuku and Christine Mahihu.

  • 40% of the respondants of the research proved to be e-commerce consumers, with slights differences between the three countries of East Africa (Kenya, Tanzania, Uganda)
  • The most popular product with East Africans is… airtime, which is understandable. Airtime is itself mobile money used to transfer value through mobile phones (you can pay bills with airtime, for instance). Mobile phones and gadgetry come second as a ‘true’ product.

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  • People find these offers in web applications for the most part, then social media strategies redirect people onto apps.

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  • Payment in e-commerce in Kenya, Tanzania and Uganda is mostly in mobile money, such as M-Pesa, rather than credit cards (which have only 10% penetration in Kenya, for instance). Credit card payment remains popular for airlines.

Future e-commerce trends and challenges in East Africa

  • Buy online / Pay offline, for people who need to see the product first before spending their money (we find the same trend of “cash on delivery” in South-East Asia)
  • Growth of e-commerce as utility providers (electricity, telcos) and government services (taxes, fines, benefits) are entering the mobile money space
  • Expansion of mobile money as a way to pay for goods and services.

Some challenges still need to be addressed to gain more customers for e-commerce in East Africa:

  • Solving the payment barrierfees can still be pretty high, and solutions are not widespread enough
  • Increasing trust: a first purchase made online with poor delivery will discourage consumers
  • Security challenges: businesses willing to pay and receive money for goods need to know they work in a secure environment (but, as remittances show in another panel, compliance has a cost)
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The e-commerce landscape in Africa

As a conclusion, a joke from Mbwana Alliy, founder of the Savannah Fund: “In Africa, there’s no place for e-commerce. People have more basic needs, like water, food. Oh, wait, NOT, here’s the true slide”. You have here a pretty good overview of the e-commerce landscape in Africa, curated by one of the top VCs in the place.

Martin Pasquier