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50%+ Ecommerce growth in Tanzania
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50%+ Ecommerce growth in Tanzania

April 2018

12 min reading

The mobile shift

In recent years Tanzania has experienced a unique digital revolution driven by advances in telecommunications (3G to 4G) and mobile payments. Unlike most other countries, Tanzanians skipped using desktops and jumped straight into browsing the web on mobile devices. Now with all major telecommunication providers offering mobile payment systems, Tanzanians and businesses are changing how they trade and make transactions. The 2018 launch of mobile payments, locally known as M-Pesa is pushing ecommerce mainstream. Not many Tanzanians have credit cards or a Paypal account, but almost every Tanzanian has a M-Pesa account or access to it.

Past to present

Prior to M-Pesa if a businesses that wanted to launch an online store or ecommerce platform would face payment handling problems. It would either have to target foreign markets or foreigners in Tanzania as most would own a credit card, Paypal account or other form of common ecommerce payment means. It would have to accept cash on delivery for the local mass market. This is wouldn’t be considered long term sustainable as the local market is exponentially bigger and the high risk of carrying cash after delivery. Now any business that wants to take payments directly online needs to simply build a website and integrate it with an M-Pesa provider from Tanzania. Easier payment management through M-Pesa solved one of the biggest hinderances of its mainstream acceptance – convinience. Furthermore, Tanzania was the first country in the world to achieve full interoperability of mobile money payment providers. With over 44% of adults having access to M-pesa and ability of users of different mobile money services to transact directly with each other, Ecommerce is a one of the major beneficiaries.

Some statistics

Some statistics related to mobile payments include: – Mobile money penetration rates in Tanzania are 65% in urban areas, 25% in rural areas ( updated: May 2018 – Tanzaniainvest ). – 1,444.6 million transactions valued at TZS 49,997.1 billion ( $22.5 billion ) were transacted in mobile money transfers between July 2016 to April 2017 ( Bank of Tanzania )
Tanzania Ecommerce Growth LORDEYS Dar es salaam
Women leading the online shop movement in Tanzania

Few big players

As eCommerce is still growing there is only less than ten official companies offering such services which include:
  • Jumia

    was our favorite not because of design and technologies used but its brand reputation. Before pulling out of Tanzania, it the most famous and leading ecommerce platform in the country.
  • OLX

    was a good example of a modern looking market place. The company had invested well in modern branding, which often tells you a lot about a business. Before pulling out of Tanzania they also have advertisements on TV and several delivery centers in strategic parts of the city.
  • Shoponline

    have a decent website, but it is not secured with HTTPS. This tells us that their investment is limited or are too focused on offline businesses. In doing our research very few people have herd of this brand nor used them.
  • Zudua

    have a really old website which tells us that they are not doing to well. Based on this we decided not to research the company. We need to approach these guys for a rebuild.
  • Kivuko

    also have a really old website which tells us that they are not doing to well. Based on this we decided not to research the company. We need to approach these guys for a rebuild.
Despite these nice statistics why are there only less than 10 ecommerce sites in the entire country? Even though the payment methods problem has been solved, there are still other barriers that are preventing further ecommerce growth in Tanzania. Our quick survey highlighted the following problems holding back ecommerce in Tanzania and how local companies are tackling them.

Challenges

  • Lack of sufficient start up capital

    to setup a professional ecommerce business, as you can see almost all these current ecommerce companies are foreign funded or owned by foreigners. Where are the locals? They use free social media: Input Mpesa account details and products on a free blog, Whatsapp, Facebook, Instragram.
  • Lack of proper delivery addresses

    Sometimes delivery addresses are mis-represented and its a challenge to get to destinations with pin-point accuracy. A lot of time is lost in delivery time due to lack of proper home addresses. A reasonable number of Tanzanians still lack postal code addresses in their localities. Currently most ecommerce businesses do scheduled delivery at commonly known buildings and delivery centers. Customers picking up their products at a delivery center near them is inconvenient but currently works.
  • Lack of trust from buyers about the seller

    As online shopping is still very new to Tanzanians it will take time for people to feel comfortable in paying for items they do not physically see. This is more deeply rooted with culture and lack of laws that govern online businesses and especially ecommerce platforms. Most people are concerned their items may not arrive after payment is done, or what arrives is not what was put online.
  • Privacy concerns

    Most people are concerned about how their personal information given, especially mobile phone numbers, will be used by ecommerce platforms. Identity theft through mobile phone numbers is very common in big cities like Dar es salaam and most people do not trust online shops to store their details securely. As you may have noticed very few online shops have secured domains, their sites are old, and mostly operate through instagram and social platforms.
  • Ecommerce product delivery and inventory management hurdles

    are also keeping Tanzanians from buying online. They prefer not to wait days for an item. Or find it sold out online when they can get it offline instantly with a few minutes drive. It is also hard and expensive for online businesses to store and transport perishable goods as gas prices are not stable, electricity is not constantly available. This challenge is worse during hot summer seasons where most businesses need electric generators to keep perishable goods from going bad.

Hope and opportunities

These problems are the opportunities. There is still a need for proper delivery companies that will integrate with sellers to convince Tanzanians that buying online is worth it. With banks and other financial systems getting online, a more than 50% growth means more opportunities for both foreign and local Tanzanian businesses. With relaxed laws this provides several advantages for business as there is less competition. Several years later you can expect big players to enter the market and close this opportunity ( yes I’m looking at you Amazon ).

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