9 January 2021
Introduction: Start of trading under the AfCFTA
On 1 January 2021, African countries started trading under the African Continental Free Trade Area (AfCFTA) regime. With a population of 1.2 billion and a cumulative GDP of $2.5 trillion, the AfCFTA creates the largest trading bloc with a market of about 1.27 billion consumers. This number is expected to rise up to 1.7 billion by 2030. Intra-African Trade is one of the lowest of any region globally. Currently, the percentage of trade that African countries do with each other is a mere 16 – 18%. If the different African countries trade together, this figure can go up. The start of trading under the AfCFTA is an opportunity to raise trade figures.
Some models for e-commerce
This piece focuses on women and the choice of platform for continental e-commerce under the AfCFTA. While e-commerce is yet to be negotiated and determined during the second phase of negotiations of the AfCFTA, Africa can take some lessons from the current trend in e-commerce for the new continental FTA.
It is reported that African e-commerce sizzles with Chinese goods. Most of the products come from platforms such as AliExpress, (one of Alibaba’s subsidiaries), because they are cheaper as compared to shops and supermakets. Consumer behaviour dictates the e-commerce business model. Lubomira Rochet, head of digital marketing at L’Oréal, one of the world leaders in beauty products, contrasts the bottom-up, “consumer-centric” vibrancy of Chinese e-commerce with the West’s “tech-driven”, top-down approach. Mark Schneider, boss of Nestlé, the world’s biggest food company, instructed his executives, “if you want to see the future, look to China.” Should Africa follow the Chinese or West’s approach or something in between?
The Chinese model of e-commerce blends digital payments, group deals, social media, gaming, instant messaging, short-form videos and live-streaming celebrities. The result is a mix of shops, entertainment venues, food courts, games arcades and gathering places that replicates the 20th-century American mall in digital form, and hybrid links of the virtual with the physical. Videos show something being crafted by hand. Influencers draw attention to how the item is used. Friends recommend it (or not) on social media. Shoppers band together with other netizens to buy it in bulk at a discount. Live broadcasts turn the whole process into entertainment. And a network of real-world businesses delivers the purchases.
This “social commerce” model – live streaming, short-form video and social net-working – accommodates basically all categories of people. “The line in people’s minds between social networks and shopping websites does not exist in China”, notes Frédéric Clément of Lengow, a consultancy. Other countries, outside the West, are inspired by the Chinese e-commerce businss model. Many leading e-commerce firms in South-East Asia (Grab and Sea), India (Jio), and Latin America (Mercado Libre) are influenced by the Chinese strategy of offering a “super-app” with a bundle of services from noodle delivery to financial services. The giant consumer-goods firms that straddle the Western and Chinese markets may transmit Chinese ideas and business tactics, too. Multinationals such as Unilever, L’Oréal and Adidas make more revenue in Asia than in America and their bosses turn to there, not to California or Paris, to see the latest in digital marketing, branding and logistics.
Formally social-networking firms in the West are diversifying their business models to include the Chinese approach. Facebook is now promoting shopping services on its social networks, and engaging in “social commerce”, including in live-streaming and the use of WhatsApp, for messaging between merchants and shoppers. In December [2020] Walmart hosted its first live shopping event within TikTok, a Chinese-owned video app in which it hopes to buy a stake. In France in the past quarter the sixth-most-downloaded e-commerce app was Vova, linked to Pinduoduo’s founder. And new entrants may finally make progress in America—the share price of Shopify, a platform for those who do not use Amazon and small firms, has soared so that it is now valued at more than $140bn.
Challenges
Counterfeiting is a major challenge. During a Red Points webinar on “Counterfeit products on social media: Taking action against fakes on Facebook, Instagram and other social media platforms”, Gene Quinn, of IP watchdog, stressed the importance combining technology with human behaviour to fight counterfeits on social media. Many counterfeiters like to use private platforms, such as secret platform on Facebook. It is important to protect against counterfeiting but also tackle fraudsters who come back with another name. E-commerce platforms like Alibaba have come up with initiatives to remove illegal listings if found. But counterfeiters move to social media to avoid blocking of “coming back”.
Social media platforms are using their devices to remove repeated infringers, but infringers still figure out how to go round the blocking, for example by changing IP address. According to Bruno Klumpp of Red Points, people are more aware now of fraudsters’ techniques but with technology modes are changing. Consumer education on identifying and avoiding falling in the trap of fakes is necessary.
Canada-based Shopify’s technology powers over one million businesses in more than 175 countries. Shopify provides the technology backbone for businesses to set up a store and sell their products online. The company has become valuable to small businesses during the Covid-19 pandemic, because its services are cheap and easy to set up. Because it is relatively cheap, Shopify is favoured by many smaller businesses that can't afford to pay for custom website builds. In addition to offering the technology to create an online store and sell their products, Shopify includes features such as inventory tracking and software to help understand sales trends. Shopify routinely monitors for fraud and other violations.
Women, “social commerce” and e-commerce
Fakes and fraudsters existed even before e-commerce but the situation is worse on online platforms. Women are easy victims of online fraudsters’ techniques, including the use of malware (shorthand for malicious software) designed to cause extensive damage to data and systems or to abuse privacy by gaining an authorized access to a network.
Nevertheless women, who are very active in the micro, small, medium-sized enterprises stand a high chance of benefiting from e-commerce since, arguably, digital spaces provide equal opportunities for both men and women. A female entrepreneur testified during an interview that e-commerce platforms like AliExpress have provided a respite during the COVID-19 pandemic. African women have the potential to operate as traders on the e-commerce platforms and not merely consumers. How would the African entrepreneurs use existing platforms to set up and run their e-commerce shops?
African women e-commerce entrepreneurs may consider broadening their business models to embrace “social commerce” while holding their businesses on various platforms, including those from China and the West like Shopify. “Social commerce” would appeal to consumers on the African continent where social interaction is an essential part of day-to-day living. The AfCFTA might consider facilitating “social commerce” specially among women entrepreneurs to help increase their capacity to trade under the AfCFTA.