E-commerce still accounts for the largest chunk of global digital economy despite challenges

Ganiu Oloruntade

Several dramatic events shook the world in 2022. The Russia-Ukraine war, inflation, supply chain shocks, and others pointed towards an economic recession, making it a rocky year for the global digital economy.

After years of impressive growth, the global e-commerce industry’s revenue profile encountered challenges last year. The industry was at a turning point after the expansion sparked by the COVID-19 pandemic.

According to data tracking the industry’s performance year over year, it declined by $250 billion. Per Statista Digital Market Outlook, the revenue for 2022 decreased for the first time in the market’s history, from $3.84 trillion in 2021 to $3.59 trillion.

But despite the slowdown in revenue, the e-commerce sector still had a pretty good run last year, accounting for the largest chunk of the global digital economy, according to Statista Digital Economy Compass 2022 (pdf).

“2022 will be the first time in its long history that the market will see negative revenue growth. Of course, this always has to be seen in perspective, and many industry experts contest the comparison of today’s growth figures with pre-COVID-19 data.”

“Nevertheless, the market is now compelled to tackle substantial questions and how to go forward. Even if there is a lot of headwind at the moment, we still believe online shares will eventually increase and revenue growth will get back on,” the report said.

Read also: Africa’s mobile economy is headed towards boom in the next three years

Africa’s share of the pie

The growth of e-commerce in Africa in recent years has been impressive, thanks to the continent’s young population and growth in internet penetration. Similarly, mobile technologies and services are on the rise on the continent. For context, Africa’s digital economy is expected to hit $712 billion by 2050, according to a 2022 report by Endeavor Nigeria.

Data shows that the volume of e-commerce activities in sub-Saharan Africa (SSA) is on an impressive growth path. In 2022, the revenue generated by online shopping in Africa was estimated to be around $37 billion, increasing from approximately $13 billion in 2017, according to Statista Digital Market Outlook.

E-commerce in Nigeria. Image Source: Technext.

In Africa, the growth of e-commerce has been largely driven by the demand for online retail services. Also, the COVID-19 pandemic made many businesses pivot from offline modes of payment to online payment systems, spurring the growth of e-commerce.

More importantly, mobile devices have played a big part in pushing e-commerce on the continent. With broadband penetration standing at 43.1% last year, most transactions are carried out on mobile devices. Per this TechCrunch article, over the last eight years, the number of people connected to the internet in Africa doubled to 28% due to increased broadband internet coverage and smartphone penetration.

In 2021, mobile technologies and services added almost $140bn to Africa’s economy, according to GSMA’s The Mobile Economy Sub-Saharan Africa 2022 report. Similarly, the number of people with mobile phones is also rising. At the end of 2021, there were about 515 million mobile subscribers, representing 46% of Africa’s population.

GSMA also predicts Africa will add nearly 100 million new subscribers by 2025, bringing the total number of subscribers to 613 million – almost half of the region’s population. This projected growth also means more money for the continent. Mobile’s contribution will hit almost $155 billion by 2025.

With the rise in the adoption of mobile devices, e-commerce in Africa is poised to add to the global e-commerce numbers. Statista predicts that by 2027, the e-commerce sector in Africa might reach a value of over $82 billion.

Related article: Visa predicts eCommerce in SSA to hit $7trn by 2024 as Nigeria, Kenya and SA show strong growth

Social commerce as a challenger

As e-commerce continues its impressive run across global markets, social commerce is building up as the challenger to watch out for. Before now, social media platforms are used to communicate with other people. But in recent times, this trend has changed, all thanks to the emergence of social commerce — a type of online selling where transactions take place via social platforms (such as Facebook, Instagram, Twitter, and WhatsApp) and largely involves direct business-to-consumer interaction.

According to Forbes, the future of sales is social commerce. The numbers seem to affirm this claim. In 2021, global social commerce sales reached $492 billion, but it is expected to nearly triple by 2025 to reach $1.2 trillion, according to a new study by Accenture. Per data from Statista, sales through social media channels worldwide are expected to triple by 2025.

In Africa — one of the fastest-growing e-commerce markets in the world — social commerce has huge potential, especially with the increasing adoption of social media on the continent in recent years. A Q1 2022 Social Commerce Survey projected that the social commerce industry in Africa and the Middle East would grow by 70.3% annually to reach $8 billion in 2022.

Image Source: Reuters/Dado Ruvic.

The footprint of social commerce in Africa is unmissable, as many African business owners continue to rely on social media platforms to sell and promote their products and services to reach their customers. Judging by the deep penetration of social commerce in Africa owing to the likelihood of more Africans joining the train, the future looks promising.

Speaking at the 2022 edition of TechCabal’s #FutureofCommerce held last September, Kelvin Umechukwu, co-founder and CEO of Bumpa, said social commerce has the potential to triple the e-commerce market in the coming years more than traditional commerce.

Read also: What is the future of social commerce in Africa? Panellists at #FOC2022 share thoughts.

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