Research into African e-commerce has consistently found that only a minority of startups in the sector reach profitability, which reflects the specific economics of selling online across the continent rather than any shortage of demand. Logistics costs, payment friction and customer acquisition spend are the three constraints that most often keep an otherwise growing e-commerce business unprofitable.
E-commerce attracts founders partly because the model appears simple, but the underlying unit economics in African markets are considerably harder than in markets with cheap, dense logistics networks and near-universal card payment.
Delivery costs frequently exceed the margin on the order
Last-mile delivery across dispersed addresses, inconsistent addressing systems and long distances between population centres makes per-order fulfilment expensive, and businesses selling low-value items frequently find delivery consumes the entire gross margin on a sale.
Payment friction reduces conversion at the final step
Lower card penetration and customer caution about paying online in advance means a meaningful share of interested buyers do not complete a purchase, and cash-on-delivery, which many businesses adopt in response, introduces its own costs through failed deliveries and returned stock.
Customer acquisition costs rise faster than repeat purchase rates
Many e-commerce businesses acquire customers at a cost only justified by repeat purchases that do not materialise, which means tracking the actual repeat rate rather than assuming it is what determines whether acquisition spend is investment or loss.
Profitability generally follows focus rather than breadth
E-commerce businesses that reach profitability tend to narrow, to a specific category, a defined geography, or a delivery model they can operate efficiently, rather than pursuing the broad marketplace model whose economics only work at a scale most businesses will not reach.
Frequently asked questions
Why do most African e-commerce startups struggle to become profitable?
Because of the specific economics involved, logistics costs, payment friction and customer acquisition spend, rather than any shortage of customer demand for online shopping.
How significant are delivery costs to e-commerce profitability?
Frequently decisive. Dispersed addresses, inconsistent addressing and long distances make per-order fulfilment expensive enough that delivery can consume the entire gross margin on low-value orders.
What problems does cash-on-delivery introduce?
While it addresses customer reluctance to pay online in advance, it brings its own costs through failed deliveries, returned stock and the working capital tied up in goods that come back unsold.
Why does repeat purchase rate matter so much for e-commerce?
Because acquisition costs are typically only justified by repeat purchases, which means a business assuming repeat business that does not materialise is treating a loss as an investment.
What distinguishes e-commerce businesses that do reach profitability?
Focus. They tend to narrow to a specific category, geography or delivery model they can run efficiently, rather than pursuing a broad marketplace model whose economics require scale most businesses never reach.
Further reading
Originally published in December 2017. Updated September 2026 to focus on the structural e-commerce economics behind the original finding rather than a single report’s figures.
