Logistics and eCommerce – an African perspective
It is no secret that Africa provides a massive opportunity for foreign and local businesses alike. The African continent displays growing similarities to that of the Asian exponential growth of the 1970’s. With a rising middle class that is soon going to outstrip some of the developed worlds’ economies, Africa will have substantial purchasing power. Like the growth of all middle-classes in history, the new, rising African consumer will be demanding, knowledgeable and will want all the goods and services that are in abundance in the developed world.
The Internet is one of the driving forces behind the rise of the African consumer. A McKinsey report noted that by 2025, the internet will have brought Africa’s GDP an additional US $300 Billion. With more and more Africans getting connected coupled with a greater demand for quality goods, eCommerce is now a new and growing phenomenon in Africa. The fundamental guarantee for eCommerce success is logistics. Thus, if there is a rise in eCommerce, so to must there be a rise in demand for quality logistics service providers to deliver the eCommerce promise. Logistics companies that have proper first-mover advantage and established local networks, through local partnerships, will tend to benefit the most. The African logistics market is set to grow from US $128.5 billion in 2012 to US $157.3 billion in 2016.
From the moment a customer purchases a product on a website to the physical delivery, the etailer is under the critical, time sensitive eye of the customer. People who shop online generally do so because online shopping provides a greater range of products, better pricing, ease of comparative shopping, and, most importantly, a high degree of convenience. The convenience of online shopping is only achieved if the ‘last mile’ is swiftly and reliably dealt with. The last mile generally refers to the final leg of the online purchase that involves direct-to-consumer deliveries. This is the link between an online ordering process and a physical product delivery.
A radically new approach to business (eCommerce) brings challenges for established logistics providers as new and different idiosyncrasies need to be accounted for and addressed. Etailers also expect a lot from their logistics partners. There is a tug-of-war between etailers and logistics providers. Etailers want as many value-adds in the last mile as possible at the least cost. Logistics providers have to protect their margins. Logistics companies need to think like the etailer and understand the etailer’s needs while still remaining cost-conscious.
Some of the biggest challenges with eCommerce logistics in Africa are that most of the African populous live in rural and informal areas and this leads to bad or no address details which makes it incredibly hard for logistics companies to make deliveries. Logistics is also very costly for African etailers and this has played a major role in why most African etailers haven’t achieved scale. Logistics costs tend to be around 10% of online orders in the US and UK but logistics costs in Africa tend to be around 20%. To combat this, logistics innovation is vital for ecommerce success. To deal with bad address details, companies have established alternative delivery and pick-up points – known as PUDO’s (pick-up and drop-off points).
The great opportunity in Africa is not just for the prospective etailers, established etailers and brick-and-click retailers. The inextricable link between ecommerce and logistics provides a substantial opportunity for forward thinking logistics and fulfillment providers.
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