The Opportunities of H-Commerce in Africa

The Opportunities of H-Commerce in Africa

I think it is official now that the era of ecommerce is over. We have officially moved into hybrid-commerce (or h-commerce). Any talk of ecommerce is for history; the global business has changed the “e” with “h”. So, I want to begin that conversation in Africa by focusing on h-commerce. Today, we are reading that Alibaba is spending billions of dollars for a stake in Sun Art, the largest retail chain in China, call it China’s Walmart.

The fundamentals of this redesign are correct: it is the marginal cost and where the money is that must drive retail strategy. The money remains offline and you need an expanded strategy to meet the needs of customers in a business dominated by logistics cost (an offline component cost).

For Africa, the case for h-commerce is even stronger. We do not expect the total online retail market to move up to 1% over the next decade in Africa. Today, total online market is well below 0.1% and the players do not have the leverage to change that due to our open market system (four market days, etc in most parts of Africa), fragmented market (everywhere is market), poor distribution systems, and lack of tax advantage which helped U.S. e-tailers (Amazon enjoyed no sales tax burden collection for years, making its products cheaper than those sold in brick and mortar stores).

The path to profitability will pass through physical commerce. Why compete for 1% when 99% is out there? Amazon and Alibaba know that in 5 years as physical stores move online, their advantages will be neutralized. So, they are playing offense. If the world runs in the physical space. especially in grocery, you better go there to get the deals.

Simply, we need a hybrid commerce strategy in Africa if we want to be on the path to profitability. Marginal cost of ecommerce is dominated by atoms and not (direct) bits. (Sure, information is physical, but let us avoid that complexity here.) Hybrid commerce will require returning to offline partners, and we need to make that work for Africa. It may not be complex if our companies are open to work together and where possible merge.

 

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