How cheap data, fast and expansive mobile phone penetration, better connectivity, and Covid-19 shutdown have boosted Somalia’s digital market places.
In 2016, Soomar – Somali online market – was set up and operationalized in the country with a very straightforward vision: To get everyone, or at least as many people as humanly possible, in Somalia, to switch from physical and in-person shopping to digital shopping by transforming Somalia’s traditional culture of one on one and personal commerce to a digital model while maintaining the trustworthiness and authenticity of the Somali way of doing business.
In the years to follow, Mohamed Mohamud, the CEO of the e-commerce platform, and his team built a functional and intricate network of suppliers, factories, mobile money service providers, transport sector and delivery service providers, banks, and other necessary players and partners. The result has been a wild but fulfilling journey. And, Soomar has not been alone in this journey.
In the last decade, online marketplaces have brought the market and products right into people’s living rooms and, in their palms. You can positively blame a collection of chance and deliberate factors…
Experimenting with e-commerce
As far back as 2013, entrepreneurs had started experimenting with e-commerce platforms as a business model in Somalia. Even though it was unchartered territory in the country, internet connectivity was an issue and infrastructural limitations existed; led by visionary entrepreneurs and enthusiastic young people, e-commerce as a way of doing business became an option for consumers and for service providers.
Soomar CEO Mohamed Mohamud said in an interview with The Somalia Investor that at the beginning, there were product shortages since not many suppliers and factories were eager to engage in digital buying and selling, the country lacked decent and reliable payment systems, road and transport infrastructure was bad, making deliveries difficult (late) and costly, there was lack of postal services and delivery was even more complicated by Google Map’s inability to pick up and recognize locations in Somalia.
“Everything was zero. No payment gateways, no portal for service (user interface), no delivery system and, problematic transport and delivery systems. We started by organizing a team of local software and computer developers to come up with a localized platform (not borrowed from international platforms) built on traditional Somali trade culture – a simple and easy-to-use platform, just as a one on one physical trade. When this was done, we established a delivery and transport network and thereafter linked up with wholesale companies since factories and suppliers were not comfortable partnerings with our new initiative at the time,”Mohamed Mohamud, Soomar CEO
Building trust with customers
It wasn’t just factories and suppliers having cold feet towards e-commerce. Even consumers, though excited, still had misgivings about e-commerce.
“To get people on board, we had to make the public understand how the platform works, build trust with customers. E-commerce was new in the country and we had to do a lot of explanation, did lots of marketing, including making video tutorials and video explainers. To add to this, we insisted on cash on delivery as a way of building trust,” says Mohamud.
The platforms that existed back then, catering to a variety of needs for the available urban (mostly) market signified not just a shift in consumer behavior ( the desire to move from physical shopping to digital shopping) but also the emergence of a new untapped market.
As internet connectivity has grown better and more reliable, and mobile phone access and ownership has increased, the number of people in Somalia, both young and old who rely on e-commerce as opposed to traditional shopping has increased exponentially. And as users got comfortable with e-commerce, more and more entrepreneurs set up elegant and reliable e-commerce platforms offering different shopping or service provision experiences to the public.
Whether it is booking flights, or ordering lunch, or buying drugs for a sick patient, or purchasing household items, or acquiring vehicle spare parts; there is an e-commerce platform that can provide it.
Online businesses and digital marketplaces in the country have grown and earned the trust of the public, including those that are run on social media platforms. After purchases have been made or orders have been taken, customers are certain that they will receive their products in a timely manner and without any alterations to their order. This applies to all goods, from electronics to food deliveries from hotels and restaurants.
The shutting down of most services due to Covid-19 has been a blessing to e-commerce entrepreneurs. Since movement was limited, except for essential service providers, people turned to online marketplaces in the country. Digital marketplaces teamed up with restaurants and supermarkets (plus other service providers) and with delivery services to provide needed items to consumers who preferred not to make the trips themselves. Covid-19 shutdown, while helpful, was purely circumstantial in adding to the growth of e-commerce in the country.
The biggest contributor to the explosion of e-commerce is the cheap internet data charges by the various telecommunication firms.
In 2020, Somalia was rated as the country where citizens can access the internet at the cheapest and most affordable rate on the continent. Globally, with data costs of 1GB data for 30 days at $0.18, it was listed among the top ten countries across the world with the most affordable rates.
Cheap internet data costs
Speaking to Business Daily newspaper in Nairobi, Abdiaziz Issak, the Director-General, Ministry of Posts, Telecommunications & Technology, Somalia said that reduced taxes and improved regulation made it possible for telecommunication firms in Somalia to provide such affordable data rates.
“The National Communications Act, which was passed in 2017, paved the way for further development and increase of investment for the telecom industry. A unified licensing framework was also developed which protects the competitiveness of the market and encourages more investment in the sector. . Therefore, the consumer’s choice is increased to more efficient low-cost services provided by the operators,” he told the Business Daily.
At the time of this interview, there were about 11 telecommunication firms offering various data packages in the country. This created room for competitive pricing and the winner, it appears, has been threefold; telecommunication firms, their subscribers, and e-commerce platforms. With affordable data, customers can spend as much time as they want surfing the internet for products and to make online purchases without internet disruption. This access to cheap and affordable data still holds.
Today, e-commerce has become ubiquitous in Somalia, with almost every company, despite having physical shop locations and service points, still insisting on being part of digital market platforms. As for the explosion of various e-commerce platforms in the country, this trend is unlikely to abate, and consumers will keep reaping the benefits of a vibrant and competitive market.
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