CFAO’s Africashop has pulled out of Côte d’Ivoire and Senegal after just two years, effectively leaving the ecommerce market to Jumia.
CFAO has announced the closure of its Africashop ecommerce platform in Côte d’Ivoire and Senegal, just over two years after it launched in April 2016. CFAO’s original plan was the platform would ultimately be rolled out to 10 countries in Africa, including Nigeria and Ghana.
Africashop operated as a gateway for African consumers to access brands from Europe and beyond. The platform’s partners included clothing retailers H&M, Zara and La Redoute, French electricals retailer Boulanger, electronics brands such as Dell, HP and Samsung. Africashop retailed brands in clothing, electricals, health and beauty, home improvement, furniture and homewares. It did not retail grocery products. Prices were 1.3-1.5 times higher than French retail prices, depending on whether the goods were shipped by sea or air.
Leaving the market wide open for Jumia
The closure effectively leaves the general merchandise ecommerce market in Côte d’Ivoire and Senegal to Jumia. Africashop’s exit also comes after the closure of Casino and Bolloré Africa Logistics’ joint venture in Africa, CDiscount Africa. CDiscount launched in 2014, and was rolled out into Burkina Faso, Cameroon, Senegal and Côte d’Ivoire. Having closed down the Burkina Faso, Cameroon, Senegal operations, in February 2017 CDiscount also closed in Côte d’Ivoire.
CDiscount sales never exceeded $1m annual turnover in any country in Africa. We expect the same is true for each of the Africashop operations: revenues were likely only a few hundred thousand dollars annually at best. As an example of obstacles: Africashop initially decided against taking cash on delivery, because it is operationally complex, expensive and a fraud risk. It had to go back on that decision and accept cash because the consumer base for digital and online payments was simply too low.
Delivery a major factor
A further factor was the lack of physical delivery points.
Delivery points for click and collect greatly streamline logistics (and the cost of logistics) and allow for more rapid expansion of coverage. In Côte d’Ivoire, the failure of CDiscount to partner with Casino’s supermarket partners – Mercure International and Prosuma – to offer click and collect was cited as a factor for the proposition failing. CFAO launched Africashop in Côte d’Ivoire with just one physical retail outlet, leaving it unable to offer a proper click and collect option. By contrast, Jumia has established a large physical network of delivery points.
The bottom line
Even Jumia, which operates at larger scale than either CDiscount or Africashop did, is burning cash. In March we reported that the company’s owner, Rocket Internet, was reportedly seeking an IPO for the business with a listing of shares to the value of €200m ($246m). In the first nine months of 2017 Jumia saw its losses widen to €80.7m ($99.1m), while revenues were just €57.3m ($70.4m).
The bottom line is that large scale general merchandise ecommerce in almost all of Africa is expensive to operate, primarily because of the considerable logistical hurdles and the lack of scale that underpins the success of, for example, Amazon.
We know consumers value the choice and are receptive to the deals offered via online retail. But the key to success remains elusive while demand is relatively low. This lack of demand right now hinders the rapid deployment of some of the innovations Amazon has used in developing countries (such as using ‘smart’ GPS to learn and record about where a product was actually delivered to a customer, and offering incentives to convert customers to digital payments).
In the short term, the most successful general merchandise rollouts for online retail are likely to come from companies that have four factors in their favour:
- Existing demand and an existing customer base
- Buying power
- An existing logistics infrastructure to piggyback on
- Physical delivery points
In other words, supermarket chains. Or companies that partner with them.
