The Fintech revolution in Africa is now unstoppable but not without e-commerce
When Rocket Internet through its African arm, Africa Internet group (now Jumia group) launched in Africa two years ago, we collectively thought that the e-commerce revolution was finally upon us. AIG unleashed about 7 e-commerce startups consecutively in a span of less than 6 months. But AIG wasn’t in it alone, In Uganda alone we had at least more than 20 other online shopping websites all fighting for the slot of the next Amazon or Ebay or Craig’s list of Africa.
Two years down the road, the e-commerce storm has sort of settled. Jumia group has had lots of challenges leading to staff layoffs and closures in some markets despite having been fronted as Africa’s first unicorn. More than half of the other home-grown e-commerce stores can no longer be traced.
Fintech on the other hand is like a gold rush. Almost every month, I hear of a new startup promising us the easiest way to pay bills and transfer money. You can read about some prominent Fintech startups in East Africa here. And this is mostly a good thing if you have read my distaste for banks.
E-commerce and Fintech should be complimenting each other. Think about Paypal and E-bay for instance. Amazon and Visa. E-commerce is a host and Fintech a parasite. Unfortunately at this point, Fintech looks to have a head-start over e-commerce.
So what happened to e-commerce?
Infrastructural nightmares
Industry experts correctly predicted that without a doubt e-commerce is the next frontier in trade in developing markets. Thanks to high mobile penetration rates and steady internet growth, a growing middle-class and the human need for convenience, it’s no-brainer that people will be making orders while comfortably watching Game of thrones in their PJs.
But what experts didn’t tell you is the massive infrastructural challenges that besets most African economies. While anyone can setup an online store within minutes today, delivering a product anywhere just within Kampala Metropolitan is such a nightmare. Poor road network, traffic jams, almost non-existent addressing system means online retailers spend more money and time delivering the product to the customer than their counterparts in the west.
High prices
The value proposition of e-commerce should really be price. If online retailers can sell their products at a much lower cost — say even 10% lower than that of brick-&-morta stores — then online shoppers would have a good incentive to shop online. I would personally shop for my beloved sandals from Jumia or Killimall or Paple Rayn if the price was Ugx 90,000 instead of Ugx 120,000. But to my dismay I often find the prices are higher or more or less the same as those of brick-&-morta shops.
But one would argue that since the product is being delivered to my house, the convenience I get from shipping should outweigh the price factor. In theory yes, in practice no. Walking to an actual store has unseen benefits; I can for instance try-on the sandal to see if it fits. I could even bargain with the shop owner for a lower price especially if I chose to purchase other things. I could walk into the next shop if am not satisfied with the shop owners product.
Inventory
For me this is the deal breaker. Unlike online stores like Amazon that they seek to emulate, local online stores have a narrow inventory. I have scanned Jumia countless times for electronics such as Laptops, Smartphones, Netbooks, Smart TVs, Computer accessories etc. Am always frustrated when I find just about only 10 Laptops on in their inventory. Even with small selection, the prices are still not as attractive as I would expect.
Online stores should offer shoppers almost unlimited options. The shopper should conveniently browse through a large collection of inventory until they find what they want. Unfortunately this is not the case with local online stores which forces me to walk into a super market chain like Game, ask friends around to try my luck with Facebook buy-and-sell groups.
Payment
Until now there’s no store that offers a seamless one-click payment option on their websites. Cash-on-delivery is still the proffered mode of payment among online stores. So if you’re ordering for a flat-screen TV, keep your Ugx 2,500,000 somewhere in the home before the guys deliver your screen. Having to keep 2.5M somewhere under your pillow is both unsafe and inconvenient. If you’re not at home, then be ready to trust the maid with 2.5M because she has to give it to the delivery guys. Now there’s been some Mobile money integration for some sites. That still means moving cash from your bank account to the Mobile wallet. If your bank has Mobile money integration, then you could have it easier.
So online stores are met with problems bigger than what they can chew — specifically the one to do with infrastructure. I also didn’t mention high taxes on imported goods which keep prices a lot high. Shoppers might continue to prefer shopping cheaply from global stores and ship through courier startups like Intership or through family and friends who are travelling.
Fintech on the other hand has it a lot easy. Money can be and is already digitized. It’s easier to move one and Zeros around through mobile networks and the internet than it is physical products.
In conclusion Fintech and E-commerce are like seesaw. They compliment each other. Users will want something to pay for with their smartphone while at the same time they will want to buy something that’s simple to pay for.
