My Opinion | Oct 05,2024
Mekdes Endale’s business journey began after her return from Dubai, where she lived for two and a half years. Like many businesses born out of necessity, she launched Mekdi Surprise & Delivery to cater to the diaspora, offering a reliable way for them to send gifts to loved ones back home. In the past, whenever Mekdes wanted to send gifts, she relied on family members to arrange the surprise, often fearing it would be spoiled.
“I was always afraid my surprises would be spoiled,” Mekdes said.
Starting with preparing packages for Ethiopians abroad, her business quickly grew through collaborations with caterers and gift shops. Now, during holidays, her packages start at 2,000 Br, including bread, tela or tej, and cake. Her most elaborate package, priced at 26,000 Br, features whiskey, a sheep, flowers, and qetema, a traditional grass used for celebrations.
Despite her loyal clientele, Mekdes requires a 50pc deposit for orders. With around 20 repeat customers, she remains busy throughout the holiday season.
“The day after is when I celebrate,” she says, referring to how her workload during the holidays leaves little time for personal festivities.
She has since expanded her services to include qircha, a traditional communal ox-slaughtering event, which she live-streams for her diaspora clients. Participants each pay 8,000 Br, while she purchases a medium-sized ox for 54,000 Br. Although this service is not particularly profitable, it complements her other offerings.
“This year, it’ll cost 10,000 Br,” she said.
The online business space is steadily gaining traction, driven by the convenience of avoiding physical store visits. Social media platforms serve as the primary marketplace for aspiring traders and established businesses alike. However, while many online retailers offer lower prices due to minimal overhead, some charge higher prices, justifying the markup as the cost of convenience.
Business owners like Mekdes are helping shape an increasingly competitive online market, where differentiation is key. As more businesses enter the space, niche services like luxury gifting and personalised packages are becoming popular. The lack of standardised pricing, however, remains a challenge, with logistics and delivery services still underdeveloped.
For consumers like Mahlet Dina, who juggles a full-time job and motherhood, online shopping is indispensable. From groceries to traditional spices, Mahlet finds the slight price increase worthwhile for the convenience. Yet, trust is essential in this burgeoning market. After receiving items that did not match their descriptions, Mahlet adopted the practice of checking reviews before making a purchase.
"Checking reviews saves the day," Mahlet said.
Despite increasing internet access and infrastructure projects, the sector remains underdeveloped. Most online platforms operate at a promotional level, displaying products but lacking integrated sales or payment systems. Inadequate digital infrastructure, logistical hurdles, and limited access to payment systems are among the main roadblocks.
The Ministry of Trade & Regional Integration has issued over 100 e-commerce licenses, but they operate under a service provider model rather than as a full-fledged e-commerce platform.
Jirata Nemera, director of licensing and registration at the Ministry, describes that true e-commerce platforms should facilitate transactions between buyers and sellers, offering services such as refunds and connections to banks.
“It’s not enough,” Jirata told Fortune, referring to the gaps in the regulatory framework, which still lacks provisions for issues like online receipts, revenue collection, and dispute resolution.
As Ethiopia continues to modernise its digital landscape, e-commerce holds the potential to become a vital component of the economy, offering opportunities for innovation, entrepreneurship, and inclusivity. Experts suggest that the government should focus on raising awareness of e-commerce, promoting digital literacy, and developing a robust legal framework that protects both merchants and consumers.
According to Mustofa Abdella, a business consultant, e-commerce offers substantial opportunities for Ethiopia, especially for women, youth, and small-scale entrepreneurs. The formalisation of the informal sector through e-commerce could increase tax revenue while offering marginalised groups, such as those with disabilities or those residing in rural areas, improved access to goods and services.
The expansion of telecom services and government policy initiatives further strengthen the growth potential. However, for e-commerce to flourish, Ethiopia will need to address the regulatory gaps that currently limit its success.
On the policy front, Ethiopia’s government has recognised the potential of e-commerce as a tool for economic development, particularly for SMEs. By streamlining regulations, improving internet access, and fostering a culture of digital literacy, the government hopes to create an environment where online businesses can thrive.
Ministry of Innovation & Technology is in the process of launching an inaugural national strategy to fill the regulatory void. Its five-year strategy is designed to broaden the e-commerce space, making it more accessible to domestic and global markets, boost foreign exchange revenues, and establish an ecosystem equipped with regulations and technological advancements.
The strategy is intended to articulate the nature of e-commerce modalities like business-to-business, business-to-consumer, and consumer-to-consumer within a regulatory framework.
In the new year, its progress remains to be seen. On the one hand, the increasing internet penetration, rising disposable income, and a young, tech-savvy population present promising opportunities for e-commerce expansion. On the other hand, infrastructure limitations, regulatory hurdles, and trust issues remain significant obstacles.
The recent entry of AliExpress was seen by many as an important step forward. On the logistics front, Ethiopian Airlines is positioning itself as a key player, aiming to use its hub to distribute products from AliExpress. With a logistics facility capable of handling 150,000 packages annually, this partnership is expected to address logistical issues raised in the e-commerce space.
However, establishing a seamless payment system is another critical pillar of e-commerce growth. Geoffrey Jiang, director of African Business Accounts for AliExpress, acknowledges that while local currency transactions are not yet available, partnerships with local fintech firms are planned to facilitate this service.
Still, much remains to be done, particularly in revenue collection and consumer protection. As the sector continues to grow, stakeholders stress the importance of a robust regulatory framework that can address the needs of both consumers and merchants.
For the future of e-commerce in Ethiopia, there is optimism that platforms like AliExpress and local competitors can inspire the next wave of innovation. With better internet access, more reliable delivery options, and the development of payment systems that support local currencies, the sector holds promise for growth. As more Ethiopians become digitally savvy, both consumers and businesses stand to benefit from the convenience and accessibility that e-commerce brings to the marketplace.
Experts, including economists and trade analysts, stress that for e-commerce to reach its full potential in Ethiopia, the government must address critical gaps. From taxation issues to consumer protection, much remains to be done. Successful models from neighbouring countries, such as Kenya’s mobile money revolution, provide valuable lessons on how digital platforms can transform local economies. For Ethiopia, a similar leap could open up new markets and opportunities for millions of citizens.
PUBLISHED ON
Sep 08,2024 [ VOL
25 , NO
1271]
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