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Could logistic companies be the biggest winners of Africa’s COVID-19 e-commerce race?

The first confirmed case of COVID-19 was reported in Africa on 14th February; the virus has since spread across the continent with countries and governments responding through social distancing measures, curfews, and lockdowns. The pandemic has wreaked havoc on the economy, with digital platforms far from exempt. Many platform businesses have suffered, and with that the livelihoods of platform workers, especially those that provide ride-hailing and domestic services or whose work relies on physical interactions.

"The outbreak is a big problem. The crux of our business is sending people into other people's homes. Our workers' incomes are going to be severely impacted by the pandemic." - Johannes Degn, Technical Co-Founder, Lynk Kenya.

In other parts of the world, while many platform-based businesses struggle to stay afloat, those that deliver groceries and other essentials have been in more demand than ever. In the US, Amazon hired 100,000 new warehouse and delivery workers to fulfill increased orders, and the UK grocery delivery platform Ocado temporarily suspended its online shopping service in March due to “staggering demand”. In India, online grocer Grofers reported a near 80% growth in orders.

In Africa, it hasn’t been such a straightforward success story for e-commerce. While a handful of African e-grocers (e-commerce platforms focusing on grocery delivery), have seen a surge in order volumes, e-commerce has faced challenges amid the COVID-19 crisis. For most e-commerce platforms, groceries and essential goods are only a sliver of their business. As consumer demand shifts away from non-essential shopping, both government enforced and as a natural response to the pandemic, many e-commerce marketplaces have seen sales fall.

"People are buying less. We have given our vendors who pay for visibility on a monthly basis a 2-week grace period, but we're not sure how long we'll be able to keep the vendors happy." - Yuliy Shenfeld, Country Manager, Jiji Nigeria

South Africa’s Takealot reported an 80%-90% fall in revenue during lockdown, and Jumia reported a 7% fall in the Q1 of 2020, with their 40% drop in mobile phone sales a contributing factor. Our ongoing conversations with e-commerce platforms in Ghana and Nigeria confirmed these shifts in shopping habits. Zoobashopin Ghana noted a significant fall in orders on their most popular products, including electronics and white goods, since the outbreak. Jiji, an online marketplace in Nigeria, has noticed a shift in demand with a surge in orders for food, PPE (personal protective equipment), and other essential items and a decline in fashion and other luxury products. More niche businesses — such as Bloomville, an online flower delivery platform in Ghana — have temporarily shut their businesses. These platforms, whose goods are most suited for higher-end consumers making infrequent purchases, are feeling the effect of shifting purchasing priorities.

What COVID-19 has revealed is the lack of focus among these e-commerce platforms on offering day-to-day essentials. It is these items that may well enable them to change consumer behaviour, and if fixed now, could result in them being better poised for growth in the future. Getting customers to buy, and repeat buy, essential items rather than ad-hocly purchase non-essential goods online, could be the secret to firing up e-commerce across the continent.

Other types of platforms are quickly reacting to opportunities presented by this gap in the e-commerce market. Logistics platforms in particular have been able to successfully adapt to the situation. The increased demand for direct ordering from supermarkets, pharmacies, and other essential businesses has increased demand for logistics platforms to get products into customers’ hands. GetBoda, a logistics company in Kenya told us they have seen a 150% rise in delivery orders, and are expecting this demand to again double. Similarly, in Nigeria, both and Gokada, who had recently been forced to pivot away from their ride-hailing businesses to focus on logistics, told us that they are seeing a surge in demand for their logistics services in response to COVID-19.

By partnering directly with logistics companies, rather than e-commerce platforms, these new digitized businesses can control the customer experience from start to finish. Not only does this mean ensuring properly handled and cost-effective deliveries, but it also gives customers more control over payments (eliminating the need to sign up for wallets and reducing issues related to refunds) and methods of ordering. As on-demand delivery increases, there has also been a surge in WhatsApp-based ordering, (such as the Tuskys Sendy partnership below).

With increased demand for their services, some logistics companies have begun to aggregate these new delivery partnerships. In early May, Sendy launched SendyGo in Nairobi, a grocery delivery app to help boost local trade and meet home delivery demands during the pandemic. In Uganda, Safeboda recently announced their partnership with UNCDF to provide an e-commerce platform that will connect 800 market vendors to households in need of supplies.

Pre-COVID, running an e-commerce platform in Africa was already challenging. Recently released data shows Nigeria and Kenya shoppers spend on average $43 on online purchases per annum, over $400 below the global average. Jumia’s recent exit from Rwanda, Tanzania, and Cameroonfurther points to the difficulties of running e-commerce businesses on the continent. COVID-19 has shown just how narrowly e-commerce has penetrated, both in terms of customers and products. While serving the mass market has its own business model challenges, e-commerce needs category diversification. Everyday items like groceries are driving customers online now, and they might keep customers coming back once normal life resumes. The COVID-19 pandemic may be the push that the e-commerce platforms need towards greater adoption. However, while the pandemic has forced behavior change and driven African shoppers online, many are buying food and other essentials that many marketplace e-commerce players don’t typically stock, likely due to the business model challenges of e-grocers.

A Safeboda driver in Uganda picks up fresh produce from a Safeboda vendor. Image: UNCDF

Some e-commerce companies, such as Jumia, are reacting and responding to these shifts in buying behaviors. In Ghana, Jumia Food recently added rice, oil, tomato paste, and other essentials foods to their store. “We are becoming more flexible and consumer-focused — in addition to taking into account the current environment, we adapt our offerings daily, based on what customers need, said Pearlyn Budu, Jumia Food Ghana Managing Director. In Kenya, Jumia have partnered with Twiga foods to enable them to distribute fresh produce, such as bundles of fruit and vegetables, to their customers. In early April Jumia launched in South Africa. Having partnered with brands of essential products, such as Dettol, Pampers, and Procter & Gamble, the move was said to “help consumers access essential products at the lowest price.” These shifts are already having the intended impact. In Jumia’s latest earning report, despite a small drop in revenue in the first quarter of 2020, it reported a four-fold surge in grocery sales. However, it’s not clear if Jumia’s cross-country response to COVID-19, in which essential products have been added to their offerings, is a short or long-term survival strategy.

Jumia partners with Twiga Foods in Kenya to deliver fresh produce to customers Image: Jumia As countries stay in lockdown, home deliveries will remain the norm. E-commerce companies who diversify their offerings will see greater repeat purchases online and expanded customer reach. If e-commerce companies make these strategic shifts now, they may have more fuel in the tank once the pandemic is over. Alternatively, this may mark a shift in direction for the future of digital commerce with logistics platforms, not e-commerce companies, playing a more significant role in helping get essential goods into consumers’ hands.

The author would like to thank Akua Nyame-Mensah and Jessica Osborn for their support in conducting research for this article.


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