Why does Ethiopia's e-commerce sector remain relatively inactive, even with the emergence of numerous platforms?
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The topic of e-commerce in Ethiopia has been much talked about in both business and tech circles. To date, e-commerce penetration in Ethiopia is considered low. Most “e-commerce” purchases are made through social media. But this hasn’t been due to a lack of platforms. E-commerce platforms have been springing up in Ethiopia at a rapid pace, and yet their impact (even in Addis Ababa, the hub) is quite minimal. A 2024 survey of 26 e-commerce platforms revealed that 66% of e-commerce businesses reported having a user base below 10,000. Only 17% of the surveyed platforms have a user base exceeding 50,000. Despite rapid growth, Ethiopia’s e-commerce sector is expected to reach only $137.7 million by 2029, a modest figure for a country of over 120 million people. This raises a crucial question: why does the sector remain relatively inactive, even with the emergence of numerous platforms?
History of E-commerce in Ethiopia
The history of e-commerce in Ethiopia dates back to initiatives by the Ethiopian diaspora in the United States and Canada, who began selling Ethiopian products online. The first identified e-commerce site, Ethio Link, established in 1998, primarily catered to the diaspora purchasing gifts for relatives in Ethiopia. However, this pioneering venture faced substantial operational and financial challenges, with most traffic originating abroad, limiting its local sustainability.
A more localized e-commerce ecosystem began to emerge following the Ethiopian government's rollout of 3G internet in Addis Ababa in 2012. Early platforms like Yenestore, Dibsir, Qefira, and 2Merkato launched as marketplaces, primarily generating revenue through advertisements. These platforms, however, contended with various sector-specific challenges, including logistical issues, payment processing difficulties, and the need to build trust and digital literacy among local consumers.
A pivotal moment arrived in 2019 with the launch of the Ethiopian government's "Digital Ethiopia 2025" strategy, which aims to transform the country into a fully digital economy with a strong emphasis on e-commerce. The strategy acknowledges key sector challenges and proposes initiatives focused on improving digital infrastructure, establishing a national digital payment system, optimizing regulatory frameworks, and enhancing logistical support. The government believes that capturing even 0.5% of retail trade online could generate 100,000 jobs. Since then, Ethiopia has seen a notable increase in e-commerce platforms, driven by enhanced internet access, greater smartphone penetration, rising digital payment usage, and improved payment infrastructure.
Current State of E-commerce in Ethiopia
According to an e-commerce ecosystem report from 2024, approximately 80 e-commerce platforms selling products online have been identified, with a significant majority (70% of surveyed platforms) having begun operations within the last three years. Despite this boom in platforms, trade on e-commerce platforms is still very low. So, what reasons can be attributed to this?
All the eggs in a single basket (or city)
E-commerce platforms in Ethiopia are predominantly based in Addis Ababa, the capital city, which benefits from better infrastructure and higher internet penetration compared to other regions. This urban-centric focus excludes a significant portion of the population, particularly those in rural areas, from participating in e-commerce. Approximately 80% of Ethiopia's population resides in rural areas, where internet connectivity and digital literacy are limited. A study published in ScienceDirect identifies the lack of Information and Communications Technology (ICT) infrastructure as a major barrier to e-commerce adoption, particularly outside urban centers. The absence of reliable logistics and distribution systems in rural areas further restricts the reach of e-commerce platforms, making it difficult for businesses to serve customers beyond Addis Ababa.
“I need to take it for a test drive first.”
Lack of trust is one of the main obstacles to e-commerce flourishing in Ethiopia. A study on consumer acceptance of apparel e-commerce found that the inability to physically interact with products and concerns over security and privacy deter consumers from online purchases. Ethiopian consumers often prefer to see and touch products before purchasing, a practice not feasible in e-commerce. This preference is particularly strong for apparel and other high-value items, leading to reliance on physical stores or social media platforms like Telegram, where buyers can engage directly with sellers.
The usual suspect…
Here’s a fact: a majority of Ethiopians are poor. Consumers prioritize basic necessities over non-essential items, which are often the focus of e-commerce platforms. In 2025, the household disposable income per capita in Ethiopia is forecast to amount to US$880.07. Necessities like Housing ($173.3) and Clothing ($26.78) take up significant portions of consumer spending in Ethiopia. This focus on necessities limits the market for non-essential goods typically sold online, such as electronics (23.5% of e-commerce revenue) and fashion (18.7%).
Despite the numerous challenges outlined above, e-commerce platforms continue to emerge. Most recently, Ethio Telecom launched its own platform, Zemen Gebeya. However, efforts to address these barriers remain modest at best. Regardless of how many platforms enter the market, without a consumer base that is both willing and able to engage with them, e-commerce in Ethiopia will remain a struggling and underdeveloped sector. The same energy and attention devoted to launching new platforms must also be directed toward understanding why they struggle to succeed.
