Inside Rwanda’s fast growing e-commerce industry
More in News
Technologies are portrayed as transformative. This is justified for hundreds of people in Rwanda. In the past, Johnson Mugisha, a banker, would regularly pass by a shopping mall to purchase some items to take home after work. At times it would take hours and extra costs as he wouldn’t get all the products at the same place.
Mugisha was not even able to easily purchase some of his favorite electronic products in Rwanda. But this has completely changed as he can now buy groceries and other basic items from local online shopping stores, as well as electronics on Amazon, Alibaba or other international platforms.
The situation is interestingly the same for hundreds of other busy people in Rwanda. From GroceWheels, Yubeyi Online, to Jumia Food, Pikko Store and finally to ‘Get It’, just to mention a few, e-Commerce businesses are booming, and emerging online consumers are increasing.
Christophe Nkurunziza is the brain behind Yubeyi, an e-Commerce business focusing mainly on electronic equipment like mobile phones, laptops, blenders, fridges, just to name a few. Yubeyi operates differently from known brands like Amazon, e-bay or Alibaba.
“We don’t own warehouses, but we partner with suppliers with adequate stock to ensure product availability, which is quite different from other international e-Commerce brands we know,” he tells me.
“We also focus on electronics because this is what we deal with, and where we have deep knowledge” adds the former computer engineering student.
Nkurunziza’s business is also tapping into the growing number of mobile money users. They don’t accept card payments like visa cards or MasterCard, because they believe withdraw charges are still high.
“Mobile money can work here but card payments is a far-fetched idea, because there are not many people using them and in addition banks charge a lot of money,” he reveals.
Speaking about the outlook for e-Commerce at the World Economic Forum in Davos, Switzerland, Alibaba Group’s Executive Chairman, Jack Ma, openly described the future of the mobile phone in 30 years as something that will greatly enable “global buy, global sell, global pay, global delivery and global travel”.
This means that someone in Rwanda will easily buy something from the other side of the continent, in Europe, in Americas or Asia using his mobile phone.
Having started three years ago, Nkurunziza sees unprecedented opportunities in the sector as technology grows. He moved from zero suppliers to 25 product suppliers to date. His average order value, a key metric in e-Commerce, stands at USD148.
Average order value measures the average total of every order placed with a merchant over a defined period of time. By increasing the average order value, online businesses increase their return on investment.
Nkurunziza is not the only e-Commerce entrepreneur that has spotted avenues in the fast rising industry. Lauren Russell of ‘Get It Rwanda’, too, has seen an opportunity in the sector.
“There is a lot of opportunity in e-Commerce in Rwanda. We have great reception for our business. Now, we serve the food service industry mostly hotels and restaurants, throughout Rwanda,” she says.
Get It Rwanda uses an SMS-to-order model, enabling people to make orders using SMS and popular platforms like Facebook and WhatsApp.
Russell says that platforms like ‘GET IT’ don't exist outside of Africa particularly the SMS-to-order models. “Our system is very convenient, because we allow our customers to order in whatever way is easiest for them, whether by e-mail, WhatsApp, SMS, or a phone call,” she notes.
Get It Rwanda partners with 25 farms to source their produce, they have completed over 11,000 orders to date, and often move 15,000+ items per week.
Tapping into the growing consumer spending
What is clear is that consumer spending in Africa is generally increasing. With more internet penetration, some of this spending is starting to happen online. With 50 per cent of the continent expected to have access to internet by 2025, online shopping could account for 10 per cent of retail sales, or USD75 billion, according to a McKinsey report.
There is nearly five million Rwandans who have access to the internet. The number has been growing progressively over the last five years.
Clarisse Iribagiza of DMM HEHE, opines that all the upcoming e-Commerce companies have great potential.
“The challenge that lies before us is how to make this technology relevant for Rwanda and Africa in general,” she says.
Last month, after being acquired by Japanese investors, the tech company made its way to the e-Commerce market. They introduced hehe.rw, a directory site that connects buyers to Rwandan e-Commerce sites.
Iribagiza thinks that African economies suffer from a lot of inefficiencies, which she believes could be solved by creating more technologies that match demand and supply.
“The current efficiencies trickle down to the buyer. With HeHe, the Rwandan buyer will gain more from their shopping by conveniently accessing a variety of products with a reliable delivery network,” she notes.
Two months down the road, there are close to 1,500 online users on hehe.rw and over 70 retailers that have signed up, and business owners say the numbers are growing steadily.
As technology continues to rapidly evolve, the next ten years will be a transformative period for online shopping. Studies predict that online sales will grow from around 10 per cent to 40 per cent in 2027, globally.
In some sectors, the figure will be well above 50 per cent. This should enable new smaller companies to enter the market, experts say.
Push to embrace local online platforms
Currently, when people in Africa and other parts of the world go online, they mostly use the same services and platforms. U.S. companies such as Google, Facebook and Amazon are so dominant in their respective fields, that most people consider them global market leaders.
But there is one thing that is rapidly changing in different parts of the continent. A wave of companies are entering the e-Commerce market as online activities are increasing. Businesses are seeing more avenues with the growth of internet.
Iribagiza mentions that e-Commerce is a new concept that people need to be educated on its importance and what they are losing by not embracing it first.
“With low internet penetration and ICT literacy levels, businesses need to invest more in teaching the people how to operate these sites and technologies rather than marketing something that people do not find relevant or even know how to use,” she says.
Indeed, education is key. Nkurunziza finds it challenging to work with people who have limited understanding about all these new technologies, both consumers and suppliers.
“People’s mindset is the biggest challenge, but on the other hand, suppliers equally don’t understand these new technologies. For instance, we have to do all the work of facilitating suppliers to list their products on the platform and managing inventory,” he discloses, adding that investing in education could change the situation.
He adds that there is lack of trust and fear of online fraud among many Rwandans, and that these are some of the aspects that new entrants should always put into account while designing businesses.
Infrastructure still a challenge
But education is not the only challenge. Lack of adequate supportive infrastructure is another big issue, and Russell states that it’s up to businesses to develop better systems that work for Rwandans.
“Rwanda doesn't have the same infrastructure as other markets, we're still building our infrastructure. But we have to design new systems and innovate,” she says.
Nkurunziza echoes Russell’s views saying that currently there is no trusted infrastructure that enables online payment processing system. He notes that they only rely on global systems like PayPal which are expensive.
“But in countries like Nigeria, they have their own infrastructure, which is why their e-Commerce industry is way advanced than ours,” he says.
While many companies are entering the market, some existing businesses are struggling. Jumia Rwanda recently closed its online shopping platform which operated on a business to consumer retail model.
Proprietors attributed the move to low reception and uptake by clients largely due to the nature of products sold, and they said that they had put the operation on hold to first study and analyse the market trends.
Yubeyi founder, Nkururuziza says that some of the mistakes that new players do is rushing to work with suppliers who do not have quality products that people would be interested in.
“Instead of allowing every supplier to sign up and list every product on the platform, you would at least have a few with quality products that speak to customer preferences and needs,” he says.
Keeping a positive reputation in this business is key, he adds.
Russell believes that technology must be designed for the market. “If you throw up a website and think you'll get customers, you're wrong,” she says.