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Despite Global E-commerce Growth, Emerging Markets Still Off-limits Due to Constraints

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E-commerce - Investors King

E-commerce growth is predicted to reach the pre-pandemic level by the end of this year. However, Fast-Growing and Emerging regions remain excluded from access to global e-commerce due to prevailing constraints on cross-border shopping. 

With global e-commerce sales predicted to reach $4.9 trillion by the end of this year, e-commerce has shaped new consumer habits when it comes to shopping preferences. Despite these predictions, e-commerce growth and accessibility in certain regions is still off-limits due to existing constraints that could be solved—with the right timing and approach.

In the first quarter of 2021, global e-commerce recorded $876 billion in sales—up 38% year-over-year, with predictions of a continued growth of 24.5% by 2025. Yet, the surge has not been as widespread as it would seem at a first glance. Huge numbers of the population in Fast-Growing and Emerging markets are unbanked—as many as 50% of Africans are still financially excluded, South and Central Americans following close behind with 38%. Because of this, certain regions are facing limitations when it comes to cross-border e-commerce.

Frank Breuss, CEO and co-founder of Nikulipe, a Fintech company creating and connecting Local Payment Methods to access Emerging and Fast-Growing Markets, points out that, while each Emerging Market has its own specific issues around cross-border payments, there are three main ones that stand out as most prevalent.

“Problems that are stifling growth in Fast-Growing and Emerging markets have been around for ages. Variety of payment cards, country-specific legislation and currency restrictions, as well as logistics are among the key issues hindering e-commerce growth. For example, while payment cards like Visa and Mastercard are widely available in North America or Western Europe, they’re not easily accessible in Fast-Growing and Emerging markets. Even if consumers have payment cards, these are often local ones, intended for domestic use only, meaning they cannot be used to purchase goods from international merchants.”

Breuss elaborates that the situation is similar with bank transfers. For those who have accounts with local banks, these financial institutions, in most cases, are not well-connected to the banking network internationally, making cross-border bank transfers very slow and expensive.

Country-specific legislations or the lack of them are also ongoing struggles for Fast-Growing and Emerging markets. Operational payment limits, where payment orders can be placed only on working days during certain hours, is something that Latin America deals with. Fragmented market is an ongoing headache for Africa—with over 40 different currencies and regulators, it poses hurdles to international merchants. According to Breuss, even if a consumer is able to purchase goods or services off an international website, the merchant might not have easy access to the payment itself.

Logistics issues like shipment restrictions or custom hold ups are another additional battle for many Emerging markets, adds Breuss. International merchants have to figure out ways to get goods to their clients in these regions in time, as well as overcome customs holdups, which add up to delays.

To help solve these issues for international Merchants and at the same time include as many consumers in global e-commerce as possible is not an easy task—it takes time, local know-how and perseverance, Breuss notes.

“A certain lack of clear regulations and laws in Emerging Markets up the complexity of introducing new solutions. First of all, it’s key to understand the markets and their nuances, in order to offer relevant local payment methods that are suitable for consumer needs in each market. Partnering up with reliable payment solutions providers could aid in handling money flow from Fast-Growing and Emerging markets back to the merchant.”

With issues like payment and card limitations as well as logistics, Fast-Growing and Emerging Markets are ripe for new solutions. Helping solve the long-lasting issues, could eventually draw exclusion from global e-commerce to a close. If consumers continue to show their wish to shop internationally, more merchants will try to find a solution to meet the demand—and consequently, bring more pressure on legislation to adopt the needed changes. Now, with the consumers in Emerging Markets doing exactly that, it seems to be the right time to start solving the complexities.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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E-commerce

Alibaba Eyes Gulf Expansion, Seeks Partnerships in Saudi and UAE Markets

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Alibaba CEO Jack Ma gestures as he is introduced to participate in a panel discussion at the APEC CEO Summit in Manila

Alibaba Group Holding Ltd., the prominent Chinese e-commerce giant, is actively pursuing expansion into the Gulf region, notably in Saudi Arabia and the United Arab Emirates (UAE).

Alibaba’s president, Michael Evans, revealed the company’s strategy during a panel discussion at Dubai’s World Government Summit, highlighting a commitment to local partnerships as a key aspect of their approach.

Evans underscored Alibaba’s recent endeavors in Saudi Arabia, indicating a concerted effort to deepen its presence in the region’s burgeoning e-commerce landscape.

The move signifies Alibaba’s strategic pivot towards collaborative ventures following a period of strategic realignment prompted by government scrutiny and leadership changes.

The Gulf’s growing ties with China, driven by mutual economic interests and investment diversification initiatives, present an opportune moment for Alibaba’s expansion efforts.

However, geopolitical complexities, including heightened US scrutiny of China-linked entities, add a layer of challenge to Alibaba’s Gulf aspirations.

As Alibaba seeks to reclaim its leadership position in the global tech industry, the pursuit of partnerships in Saudi Arabia and the UAE underscores the company’s adaptive approach to international expansion.

The success of these ventures could potentially reshape the Gulf’s e-commerce landscape and deepen economic ties between the region and China.

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Shoprite Shuts Down Kano Branch Due to Financial Challenges and Unfavorable Business Climate

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Shoprite

Retail Supermarkets Nigeria Limited, the owners of the renowned Shoprite Mall, announced the closure of its Kano branch, located in the Ado Bayero Mall, effective January 14, 2024.

The decision was conveyed through a circular signed by the supermarket’s management, attributing the shutdown to the current financial strain experienced by the mall in the state and the challenging business climate prevailing in Nigeria.

The circular expressed regret over the necessity of the decision, hinting at the impending layoff of all employees associated with the Kano branch.

While the closure raises concerns about the impact on the local workforce, underlying factors contributing to the move have been brought to light.

Among the primary reasons for the planned relocation is the exorbitant monthly rent of N66 million paid by Shoprite to Ado Bayero Mall.

Also, the supermarket bears the cost of independent electricity from the Kano Electricity Distribution Company (KEDCO), along with expenses for fueling and maintaining its standby generator.

When considering these substantial costs alongside staff salaries and other operational expenditures, the total financial burden becomes staggering, exceeding N1 billion annually.

Several sources within the mall have attested to a decline in customer patronage over the past two years, mainly attributed to the economic downturn affecting the purchasing power of the average Kano resident.

Shop owners within Ado Bayero Mall voiced concerns about the high cost of leasing space, with some revealing quarterly fees ranging from N3 million to N4.5 million.

The closure of Shoprite in Kano not only poses challenges for employees facing job uncertainties but also raises questions about the sustainability of businesses surrounding the mall.

Concerns about the impact on neighboring plazas and enterprises have prompted intervention efforts, with Deputy Senate President Barau Jibrin scheduled to meet with Shoprite’s management in a bid to prevent the exit and explore potential solutions.

As Kano braces for the repercussions of Shoprite’s departure, the incident underscores broader challenges facing businesses amid Nigeria’s economic realities.

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Jumia to Shut Down its Food Unit to Focus on Core Goods and Jumia Pay

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In a strategic maneuver aimed at streamlining operations and maximizing growth potential, Jumia, the prominent e-commerce giant, has announced the imminent closure of its food delivery service, Jumia Food, across several operating countries by the end of December 2023.

This decisive move underscores Jumia’s commitment to refocusing efforts on its core physical goods business and the expansion of the Jumia Pay platform across its 11-country operational landscape.

“The more we focus on our physical goods business, the more we realize that there is huge potential for Jumia to grow, with a path to profitability. We must take the right decision and fully focus our management, our teams, and our capital resources to go after this opportunity. In the current context, it means leaving a business line, which we believe does not offer the same upside potential – food delivery,” said Francis Dufay, Chief Executive Officer of Jumia.

Despite constituting 11% of Jumia’s Gross Merchandise Value (GMV) in the first nine months of 2023, Jumia Food faced challenges in achieving profitability.

The total value of food sold on Jumia Food stood at $64 million, showcasing its significant scale but not translating into sustained revenue.

The decision to shutter Jumia Food aligns with Jumia’s strategic shift towards profitability, which has seen a decline in Quarterly Active Consumers and Orders.

This shift involves focusing on viable categories and reducing consumer incentives.

While Jumia Food contributed to Jumia’s GMV, the move to cease its operations signifies a commitment to concentrating resources where the company sees the most substantial growth potential.

Notably, the company has expressed that some employees from Jumia Food may transition to roles within the core physical goods segment.

The announcement of Jumia’s strategic shift comes concurrently with Bolt Food’s decision to exit Nigeria and South Africa, attributing economic downturns, high inflation, and intense competition as key factors.

This dynamic reflects the evolving landscape of food delivery services in Africa.

In contrast, other players in Nigeria’s food delivery market, such as Chowdeck, have reported significant growth. Chowdeck recently celebrated the achievement of delivering food worth over ₦1 billion ($1.2 million) in a single month.

Its success has been attributed to strategic partnerships and a capital-efficient model.

The African food delivery market is witnessing both challenges and opportunities, with companies adopting diverse strategies to navigate the complexities.

Jumia’s decision to exit the food delivery segment signals a determined effort to prioritize sustained growth and profitability in its core business areas.

As the African e-commerce landscape evolves, companies like Jumia are making strategic decisions to ensure long-term success.

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