The Future of E-Commerce in Ghana: Key Drivers for Growth

"The future of e-commerce in Ghana lies in boosting internet penetration and infrastructural development, educating internet users to trust the Ghanaian online market for purchases, and the sustainability of vendors strategies."

The United Nations Conference on Trade and Development (UNCTAD) recently released their 2018 B2C E-commerce Index, which measures an economy’s preparedness to support online shopping in 151 economies. The index comprises four indicators that are highly related to online shopping and for which there is wide country coverage:

• Account ownership at a financial institution or with a mobile-money-service provider (% of population ages 15+)
• Individuals using the Internet (% of the population)
• Postal Reliability Index
• Secure Internet servers (per 1 million people)

Of the ten African countries ranked in the publication, Ghana was placed in the sixth position - with a ranking of 39.

As seen in the report, a competitive B2C e-commerce ecosystem appears to be an enticing foreign investment: “Several of the top ten developing countries in the index saw inflows of foreign direct investment (FDI) into their e-commerce sectors in 2017, amounting to at least $1.7 billion. Venture capital is also attracted to favorable e-commerce environments. In Thailand, e-commerce companies were the largest recipients of the $106 million of such investment in the country in 2017.”

Although many African countries surpassed world growth on three of the indicators used in the index, it is estimated that only three countries (Nigeria, South Africa, and Kenya) accounted for almost half of the 21 million online shoppers in Africa at the time of the publication. By the look of things, e-commerce readiness indicators across the continent are progressively improving but many e-commerce vendors still struggle to prove product-market-fit. Nigeria, ranked at the second position, was in the news recently for high-profile cases of e-commerce business failure.

"OLX, a popular classifieds platform backed by Naspers—Africa’s most valuable company, Efritin, an e-commerce platform for used goods, DealDey, an online discounts platform, and Careers24, an online jobs marketplace also backed by Naspers, have either scaled back operations significantly or shut down entirely."

Ghana is not left out of the e-commerce readiness “bittersweet” tales with some of its e-commerce household names still faltering. Yet, looking at the remarkable increase in disposable incomes of many Ghanaian families as well as the rate of internet and smartphone penetration, there’s every reason to believe that e-commerce is the future of doing business in Ghana.

Keys to building the future of B2C e-commerce in Ghana

The recent mobile money interoperability policy, digital addressing system initiative, and government interventions to get Small and Medium Enterprises (SMEs) online have contributed to facilitating the ease of online transactions in the country. The Deputy Minister of Trade and Industry, Hon. Robert Ahomka-Lindsey stated at the 2018 Germany-Ghana Investors Forum that as part of the government of Ghana’s infrastructure development agenda for the ICT sector, the Ghana Post is set to be transformed into a competitive ICT enhanced service provider to help in connecting the underserved. When executed, this initiative will help to fast-track courier of purchased goods.

Nevertheless, to reach the full potentials of Ghana’s B2C e-commerce sector, the following pieces need to be put in place:

Reliability in the delivery of products

Like many African countries, the trust deficit has hampered e-commerce business growth in Ghana. Poor customer relationships and uncertainty around receiving your orders or returning them, as the case may be, often make it difficult for customers to purchase online. Companies like Jumia Ghana have tried to solve this by introducing a “pay upon delivery” option but limitations still exist.

Some people I spoke to about this issue admitted to using some of these e-commerce sites for price comparison purposes before heading to the mall or nearest market to make their purchases. Business owners need to find a way to bridge this gap and educate internet users to trust the Ghanaian online market for making purchases.

The high cost of data and fragmented infrastructure

Despite the commendable efforts made in connecting the unserved and underserved Ghanaian households to the internet, the cost of broadband data is still quite expensive for both business owners and consumers. In its Internet Affordability report, the Alliance for Affordable Internet expressed that Ghanaians spend an average of 3.89% of income on 1GB of data per month.

Ghana’s top think-tank group, IMANI reflecting on the above information observed: “this clearly shows [the] internet is still not affordable to all income groups.” Clearly, more work needs to be done by “reducing the price of 800MHz spectrum to reflect the true market value,” increasing internet connectivity as well as investing in infrastructural developments to facilitate e-commerce transactions in Ghana.

Sustainable business model and funding

For the past year and a half, I've used Laundry Chief for all my laundry needs. The convenience of placing my orders online and having them picked from and delivered at home, on my timelines, makes it easy to plan such activities. As they begin to scale, they are establishing shops closer to their clients thereby complimenting online transactions with in-person services.

This allows them to target different types of clients and increase sales. Although their strategy might not be sustainable for all types of businesses, it shows a business progressively shifting gears to address the needs of its clients.

Surely, funding does play a part for companies looking to utilize this strategy or scale across borders. Nevertheless, any business that would withstand the market pressures today must, of necessity, have an “international agenda” as part of its business model.

Conclusion

To conclude, I think the best days are still ahead for e-commerce in Ghana. With a growing tech-savvy, digital natives and increasing demand for made-in-Ghana products and services, the possibilities for e-businesses are limitless. Essentially, the future of e-commerce in Ghana lies in: Boosting internet penetration and infrastructural development, educating existing internet users to trust the Ghanaian online market for making purchases, and creating sustainable e-commerce business strategies.