Business-to-business (B2B) trade and e-commerce have contributed greatly to business growth in Africa. Online stores have improved the accessibility of African products to global buyers, giving African businesses and entrepreneurs greater recognition and attracting venture capitalists to the region. This growth has also extended to development in the technology sector, as it encourages infrastructure development needed to facilitate B2B e-commerce trade.
If you’re considering expanding your B2B presence in Africa or intend to start a new digital storefront, this article outlines the key details to note. You’ll gain insight into the digital B2B market in Africa and the challenges and opportunities to consider as you expand in the region.
An overview of Africa’s B2B trade and B2B e-commerce
Africa has the largest concentration of entrepreneurs in the world, and a significant percentage of these entrepreneurs are currently investing in e-commerce. This has paved the way for B2B e-commerce in the continent, as businesses can sell to other businesses with ease over the internet. B2B e-commerce in Africa has huge growth potential, but the challenges relating to funding and financing of projects have been a major challenge to its growth.
Venture capitalists have, however, come to the rescue to support growing e-commerce businesses in Africa. Data published by research consultancy, Briter, showed that B2B e-commerce ventures in Africa secured more than $256 million in funding from venture capitalists in 2021.1
Africa’s B2B e-commerce market has experienced a tremendous increase year on year and is expected to experience several positive increases in the coming years. The estimated size of e-commerce businesses in Africa was $16 billion as of 2017.2 According to the United States Department of Commerce, the continent is set to surpass half a billion e-commerce users by 2025.3
Technological developments have also contributed to the growth of the African e-commerce trade, with payment solutions taking the lead. Another key factor responsible for this growth is internet inclusivity. While access to affordable broadband internet services and internet-enabled devices is still below average in Africa, the continent had an average of 281 million online shoppers in 2020 and is expected to almost double by 2025. This is a significant growth compared to previous years and, thus, a win for B2B e-commerce market players.4
B2B businesses in Africa have notably emphasized the ease of doing business with other businesses and have increasingly concentrated more effort on growing their business through B2B e-commerce. For most businesses in Africa, B2B e-commerce represents freedom. For some others, it represents inclusion. However, there are still several areas where e-commerce in Africa may be improved. B2B distributors and retailers may face challenges as a result of these.
Challenges faced by Africa’s B2B trade and e-commerce
Effective B2B trade and B2B e-commerce in Africa are hindered by several challenges, which mostly relate to access to payment solutions, internet-enabled smartphones, online security, and seller and consumer protection.
1. Internet-enabled devices and mobile phone penetration
Yes, over 251 million Africans use the internet, but this number is mostly limited to high-income and middle-class individuals. The average businessman or woman in Africa is still reliant on physical business media and thus considers the extra expense of internet service an avoidable one. One thing that can help B2B e-commerce overcome this challenge is affordable digital devices and internet service.
2. Unreliable logistics services and poor address systems
In addition to low internet and mobile phone penetration, there is also unreliable logistics service due to the poor address systems in Africa. However, this is more of a challenge to B2C e-commerce than B2B e-commerce.
3. Financial inclusion
Payment gateways are one of the pillars of global e-commerce. However, a sizable number of Africans remain unbanked. While fintech solutions are making efforts and even greater strides in providing solutions that cater to this, cash is still the most preferred choice for businesses. This is a major challenge for B2B trade and B2B e-commerce in Africa.
However, financial inclusion has greatly benefited from the adoption of a pan-African payment system which will lead to tariff drops across African borders and will be a major incentive for B2B buyers and sellers in the region.
While the coronavirus pandemic triggered market conditions that favored e-commerce across Africa, much work still needs to be done concerning security. Many business owners who are skeptical about e-commerce trade in Africa are concerned about the security risk they can face. Improved cybersecurity will strengthen customer trust in B2B e-commerce and trade in Africa, which in effect will increase the adoption of fintech solutions and thus result in higher financial inclusion.
5. Consumer protection rights
Consumer protection laws need to cover online trade activities. At present, only 20 out of 54 African countries have enacted consumer protection laws for online sales and orders. These laws would improve e-commerce trade in the region, and their absence is a challenge to both B2B trade and B2B e-commerce. Consumer protection laws for B2B e-commerce and trade will not only deter deceptive marketing practices but will also ensure that parties can resolve both domestic and cross-border disputes easily and on time.5
6. E-commerce business legislation
Apart from consumer protection laws for e-commerce trade, special e-commerce business legislation will also show government involvement and support for B2B e-commerce in the market and improve its reputation.
Several African countries are already taking measures to overcome these challenges through legislation and improvements in technology and banking systems. As Fintech and retail banking businesses have also played a major role in ensuring financial inclusion, and as they continue to increase in number, the gap between the banked and the unbanked keeps closing in Africa. These positive and proactive steps to overcome the challenges faced by Africa’s B2B trade and e-commerce have opened up more opportunities in the market.
Opportunities for B2B trade and e-commerce in Africa
Africa has numerous opportunities for both B2B e-commerce businesses and investors. McKinsey forecasts a 50% increase in B2B e-commerce expansion and spending activities before 2025. While B2C business models in Africa are limited by consumer purchasing power, many analysts and industry experts believe that Africa offers enormous B2B e-commerce potential that has gone unrealized.6
1. Growing access to the Internet and a youthful population
Although Africa has the lowest internet accessibility, as only 22% of the population has access to the internet, experts believe that there is a high potential for growth in this area. They project that 615 million Africans will have access to internet-enabled mobile devices, raising the inclusivity to about 50%. This is good news for businesses and investors alike, as it would likely increase connectivity and the ease of doing business in the region.7
2. Customer buying behavior and the retail landscape
Understanding customer buying behavior is important in B2B sales and it can give you an edge. Generally, consumers in Africa are used to buying their goods from local stores in their vicinity. This was recognized as one of the limitations of B2C businesses, but it is an advantage for B2B businesses. B2B businesses can easily distribute their products to average customers through local retailers, leveraging on the trust that the retailers have already built with local customers.
3. Growing mobile phone penetration
Much like the growth in access to the internet, there has been an increase in mobile phone penetration. Mobile phones are widely used by businesses to communicate with their suppliers. All that needs to be done is to sensitize these businesses about e-commerce and how it can speed up their supply chain using the same mobile phone. Exposing businesses to the perks of e-commerce such as real-time order monitoring, price comparison, and cross-border trading will certainly increase B2B e-commerce, and this is an opportunity in Africa.
4. A thriving population of tech enthusiasts
Africa’s teeming youth population is developing more interest in technology by the year and even more rapidly post-corona. This has led to an increase in technology spread and technological innovation, all of which pave the way for better e-commerce. Rightly, this growth has attracted several investors already, as five new tech startups have attained unicorn status in 2021 – Flutterwave, Andela, ChipperCash, Opay, and Wave. The tech-enthusiast population in Africa continues to prove that they can compete at a global level and that the continent is ready for next-level e-commerce.
5. A large number of retail establishments
There’s at least 1 retail shop for every 100 people in many African countries. This removes the need for customers to reach out to manufacturers or source products themselves because the things they need are right at their doorstep. However, it creates an opportunity for B2B trade and e-commerce as B2B businesses would have ample customers themselves.
Business ideas for African B2B stores
These opportunities and potential in B2B trade and B2B e-commerce in Africa have given rise to several opportunities for innovation, such as;
Dropshipping is one profitable and wholly B2B business that enhances retail fulfillment while shortening the producer-customer process. With dropshipping, you do not need to invest huge sums of money or even keep stocks of products. You only have to source for a supplier, usually a wholesaler who will ship the goods and services directly to the reseller – your customer. Dropshipping thrives in Africa as it is not hindered by the low purchasing power of entrepreneurs in Africa and does not require huge startup capital.
2. B2B services
The B2B trade and e-commerce industry in Africa is still growing, and businesses are benefiting from early entry into the market. One such business is the B2B services business. B2B services provide professional and business-related services to other businesses, such as consulting and recruitment. The ease of accessing these features online and having your business problems solved in minutes is what makes it outstanding.
The African B2B trade and e-commerce market has created an opportunity for insurance entrepreneurs to tap into an uninsured and underinsured population. These opportunities exist, especially in niche areas such as income insurance, cash protection, and commuter insurance. An intriguing factor relating to this opportunity is that insurtech companies can easily scale and diversify.
Just like insurtech, agritech companies provide other businesses with agricultural products, fresh out of the barn. This is especially profitable in Africa as Africa’s fertile land for farming and growing food.
5. Intra-African trade
The reduced complexity in cross-border trading through e-commerce has made intra-African trade more efficient than it used to be.
These opportunities are increasing in line with the internet and financial inclusion, technological advancements, and the rise of B2B e-commerce marketplaces, which offer simple digital storefronts to ease migration to digital sales.
Sell on Alibaba.com
B2B e-commerce plays a very important role in offering African businesses the opportunity to participate in cross-border transactions and to make their small businesses global.
Alibaba.com is a global e-commerce marketplace providing a unified trading experience for businesses from all over the world. Alibaba.com features a wide demographic of buyers and sellers from over 200 countries in the world, including several African countries. The award-winning international trade site has put features in place to make global trade fast, safe, and easy. These include Alibaba.com Freight for shipping and logistics, Alibaba.com Pay Later payment service, and Alibaba.com Trade Assurance for order protection.
Alibaba.com currently has more than 40 million+ active buyers on the platform, with over 400,000 product inquiries daily. Alibaba.com is available for anyone with a smartphone and internet access in all 54 African countries. African entrepreneurs can also buy and even sell their locally made products on Alibaba.com without geographical restrictions.
The all-inclusive e-commerce platform provides B2B businesses and sellers with an easy-to-build, no-code digital storefront, a suite of analytics tools, and several other business-friendly features. Start selling on Alibaba.com to enjoy these and much more. Create a seller account at no cost.