//

African e-commerce is set to boom, on that most people are agreed. According to Frost Sullivan, the market – worth US$8 billion in 2013 – will grow to a value of US$50 billion by 2018. Companies like Jumia, Konga and Takealot are raking in the investment.

Yet there is more to the story of African e-commerce than this spiralling growth and myriad opportunities. Yes, opportunities are there. No, they aren’t there for everyone. Some investors are moving away from e-commerce investments, given the need for deep pockets and the long-term nature of the play.

The size of the current e-commerce market in Africa is a hindrance to e-commerce currently, with only 26.5 per cent of the continent’s population connected to the internet, and in, for example, South Africa, only 1.3 per cent of shopping taking place online. More people will come online, and more people will shop there too, but it will take years for this to become profitable. Jumia and Konga aren’t there yet, but luckily they have Africa Internet Group (AIG) and Naspers to sustain them. And they can cope with short-term losses if the long-term gains are this big.

There is another way of taking advantage of the growing market without the need to pump billions of dollars. Niche e-commerce is taking off across Africa too, with startups focusing on narrower sectors that in return require less investment and allow the company to focus more specifically on core strengths.

Lee Geldenhuys, head of strategy and social at South African startup Hello Pretty, an online platform allowing designers to create and manage their own online stores, says the company has found that customers are less fleeting in the niche e-commerce space, which cuts down on marketing costs in the short-term.

“The customer base in general e-commerce is substantially larger, but so is what is required to go into the site, and to market to that many more people,” she said.

“There are arguably less costs associated with niche commerce. Since you are focusing on a specific product or service, it’s far easier and quicker to streamline and optimise your offering – you’re able to design solutions for your specific target audience. Bigger e-commerce players can get fairly broad in trying to serve every need.”

Geldenhuys says being a niche player also allows companies such as Hello Pretty to cater to a consumer trend that has been gaining traction in the last few years – that of wanting personalised items and services as opposed to those that have been mass produced.

“Niche e-commerce can better deliver unique offerings, as well as more personalised service,” she said.

Though she says operating in a niche does not necessarily guarantee quicker returns than those expected by the likes of Jumia and Takealot, Geldenhuys believes it does allow for a greater degree of flexibility.

“Niche e-commerce players can more easily pivot to something else – you can react to changes in the market and customer behaviour faster,” she said. “It is much like steering a speed boat as opposed to a container ship, if you will.”

Returns, however, depend on each business and its margins, whether they are niche or more general.

“As previously mentioned, there are often less resources required to start a niche e-commerce venture – it could be quite possible that they would often reach profitability sooner as a result,” she said.

Hello Pretty’s biggest personal benefit, according to Geldenhuys, has been a “far better and more personal” relationship with its sellers and customers. There is also less competition in niche spaces. But she says most players in the niche e-commerce space are doing it more out of passion than long-term financial planning.

“In our experience, people that are building niche ecommerce sites are interested in that particular niche themselves – not necessarily because they think they’ll get rich, but because they love what they do,” she said. “It can also be difficult to succeed in a niche if you have no interest in the subject.”

For Raphael Afaedor, co-founder of Nigerian groceries e-commerce platform Supermart, with both niche and general e-commerce businesses it all depends on what the founder puts into it.

“Our decision to focus on groceries and everyday essentials is because we see working urban professionals in Lagos struggle week in, week out with this problem and we believe we are well placed to solve it. We also believe the focus is important for us to provide them a solution of the highest quality,” he said.  

However, he agrees with Geldenhuys in that a more focused execution enables a niche operator to deliver a higher quality service.

“For example, when you shop on Supermart, you get to select a specific delivery window in the day to receive your products, same day. That’s unprecedented in Nigeria,” he said.

“Customers are also able reorder their grocery basket, thereby cutting the amount of time they spend shopping down to 10 minutes. Imagine they were spending up to six hours doing this prior to Supermart. Our fleet is equipped with temperature controlled units which ensure that the grocery is handled optimally in transit. All these are possible only when one is fully focused on a particular vertical. Our focus has seen customers gravitate to us and has been the reason for our rapid growth.”

Afaedor says nothing is easy, be it a niche play or general e-commerce, however.

“What my partner Gbolahan and I believe though is that one wins in any business only by providing a great customer experience. Our rapid growth over the last one year of doing this attests to that belief,” he said.

Perhaps, as Geldenhuys notes, great customer experience is easier to come by for a niche e-commerce company. Marketing costs can be kept low, and customers are more likely to keep coming back. But the challenges remain the same.

The post Niche e-commerce provides greater opportunity for those without deep pockets appeared first on Disrupt Africa.

from Disrupt Africa http://ift.tt/1Pfwak0