The e-commerce landscape in Algeria has witnessed significant growth in recent years, particularly fueled by the restrictions imposed during the global Covid-19 crisis. As lockdowns, limitations, and the closure of small businesses took effect, the online commerce sector experienced an unprecedented surge.
The evolution of e-commerce in Algeria is reflected in notable statistics that shed light on the country's progress in the digital marketplace. According to the latest annual report by the United Nations Conference on Trade and Development (UNCTAD) focusing on e-commerce, Algeria has climbed 29 places in the global rankings, moving from the 109th position to the 80th spot.
Notably, Algeria is among the four countries that have made the most significant advancement, alongside Brazil, Ghana, and the Republic of Laos, securing its place as the fourth-leading e-commerce nation in Africa. This progress highlights the growing recognition and adoption of online shopping within the Algerian market.
Furthermore, the advent of electronic payment methods has played a crucial role in driving the e-commerce industry forward. According to the General Manager of the Economic Interest Group for Monetary Transactions (GIE Monétique), Madjid Messaoudene, online payment transactions made using interbank cards (CIB) and E-dahabia cards from Algeria Post have experienced a remarkable surge, with transactions reaching 7.8 million in 2021, a significant increase from 4.5 million in the previous year, reflecting a growth rate of 70.25%.
In terms of transaction value, the total amount of online transactions surpassed 11.2 billion Algerian dinars in 2021, compared to 5.4 billion in 2020, showcasing the expanding role of digital payments in facilitating e-commerce activities.
Another crucial aspect driving the growth of e-commerce in Algeria is the flourishing home delivery service. Over the years, the service for delivering products purchased online has witnessed a significant upswing. During the confinement period in 2021, home delivery companies experienced an explosive increase in the number of deliveries, with figures soaring to 10,000 parcels per day.
The surge in e-commerce activities has also led to a notable increase in the number of Algerian e-commerce websites. As reported by GIE Monétique, the count of Algerian e-commerce sites reached 105 in the first half of 2021, representing a remarkable surge from the 48 sites recorded in 2020, signifying an impressive growth rate of 118.75%.
One of the prominent players in the Algerian e-commerce landscape is Jumia. Celebrating its 9th year of existence in Africa in 2021, with 7 years of operation in the Algerian market, Jumia remains a frontrunner and a dominant force in the e-commerce realm in Algeria and across the African continent.
Despite the rapid growth and promising advancements, e-commerce in Algeria also faces its fair share of challenges. In the following sections, we will delve into the specific hurdles that entrepreneurs and businesses encounter when navigating the Algerian e-commerce market and discuss strategies to overcome them.
Need for revision and strengthening of the legal framework and other challenges for e-commerce in Algeria:
Generally, legal initiatives aimed at protecting e-consumers and honest e-merchants from additional costs generated by fraudulent practices are always in favor of the development of online commerce.
Indeed, it is the regulatory framework and the mobilized legal arsenal that aims to reduce uncertainties for both e-suppliers and e-consumers. This section first highlights, in a clear manner, the regulatory framework governing digital activities in Algeria in general, and e-commerce in particular. Then, it emphasizes the need for revising the tax framework. Finally, it summarizes the main obstacles to the development of e-commerce in Algeria.
SUBSECTION 1: Evolution of the legislative framework for e-commerce in Algeria
Since 2000, several laws have been enacted in the case of Algeria, addressing ICT, the internet, and the protection of private data for actors in the online market.
1- Rules regarding postal services and telecommunications
In August 2000, a law was implemented to reorganize and manage the postal and telecommunications sector. It focused on separating postal services, which would be managed by Algeria Post, from telecommunication services, which would be managed by Algeria Telecom. This law also aimed to open the sector to competition, particularly in mobile telephony. Additionally, it led to the creation of a regulatory authority, namely the Post and Telecommunications Regulatory Authority (ARPT). This law established principles that allowed postal and telecommunication services to be provided in an objective, transparent, and non-discriminatory framework. It stipulates that the state must ensure the provision of universal service in accordance with legal and regulatory requirements, while respecting the principles of equality, continuity, universality, and adaptability.
2- Prevention and combating of offenses related to Information and Communication Technologies (ICT)
In August 2009, a law was enacted to establish specific rules for the prevention and combating of offenses related to information and communication technologies, including provisions for preventing cybercrime. This was achieved by adopting measures intended to be more effective against offenses that undermine automated data processing systems, as well as all offenses committed within the context of an electronic communication system.
The essential measures introduced by this law are:
1- Searches of computer systems and the obligation for service providers to adhere to the process of combating such offenses.
Considering the cross-border nature of these offenses, the Algerian legislator has established mechanisms of assistance and cooperation within the framework of this law. These include the National Body for Combating Crime and Offenses related to ICT, whose composition, organization, and operating procedures are determined by regulatory means, as well as rules for international judicial cooperation.
This law clearly specifies the cases in which electronic surveillance may be authorized.
3- General rules regarding electronic signature and certification
Law 15-04 of February 1, 2015, which sets out the general rules on electronic signature and certification, stipulates that the structuring of the national system for certification and electronic signatures is based on three complementary institutions. These are the National Electronic Certification Authority (ANCE), which is under the Prime Minister's office; the Governmental Authority for Electronic Certification (AGCE), which falls under the Ministry of Post and Telecommunications (AECE) and is under the authority of the Post and Electronic Communications Regulatory Authority (ARPCE). These three entities are responsible for issuing authorizations and monitoring and controlling electronic certification service providers.
Overall, this law provides a legal framework to protect electronic commercial transactions from cyberattacks and fraudulent practices.
4- Regulation of e-commerce
Law No. 18-05 of May 10, 2018, focuses on the organization of e-commerce in Algeria. It applies to e-commerce transactions where one of the contracting parties is of Algerian nationality, legally residing in Algeria, a legal entity, and if the electronic contract is concluded in Algeria. This regulatory text establishes the modalities for the practice of e-commerce, clearly highlighting the rights and obligations of e-consumers and e-suppliers.
This law states that electronic transactions can be paid remotely or upon delivery of the product in question, using the payment methods indicated in the applicable legislation. It thus specifies the nature and framework of e-payment. Additionally, the text highlights prohibited products and services from online transactions,Namely, transactions related to gambling, betting, lotteries, alcoholic beverages, pharmaceutical products, and products that infringe upon intellectual, industrial, or commercial property rights, as well as any product prohibited by current legislation.
Regarding taxation, this law states that transactions conducted through electronic channels are subject to the provisions of existing regulations.
If the e-supplier fails to meet delivery deadlines, delivers a product that does not conform to the request, or delivers a defective product, the e-consumer has the right to return the item involved in the transaction. Furthermore, misleading commercial offers, ambiguous contractual conditions, and violations of electronic advertising rules are punishable by law. Like other merchants, e-merchants must electronically transmit to the national trade register center the documents related to their commercial transactions, specifying the dates of their occurrence.
The law specifies a number of information that should be included in the electronic contract, such as detailed characteristics of the goods or services, delivery methods, after-sales service conditions, handling of complaints, and product return conditions in case of customer dissatisfaction.
5- Protection of individuals in the processing of personal data
Law No. 18-07 of June 10, 2018, provides a framework for the protection of individuals in the processing of personal data. It emphasizes that such protection must respect human dignity, private life, and public freedoms. This law also prohibits violations of individuals' rights, honor, and reputation.
This regulatory text establishes an independent administrative authority for the protection of personal data, attached to the presidency of the Republic, responsible for implementing the processing of personal data and ensuring that the use of information and communication technologies does not infringe upon individuals' rights and privacy. Regarding personal data related to electronic signatures, the law highlights that such data can only be used for the purposes for which they were collected. In terms of processing personal data on publicly accessible electronic communication networks, The law states that the service provider must maintain an inventory of personal data breaches, as well as the measures taken to remedy them.
Upon reading these texts, it is possible to first observe a significant delay in their enactment. However, it should be noted that the 2018 law theoretically provides a legal environment that protects the e-consumer in general. On the other hand, it is certain that Algerian legislation would benefit from simplifying and facilitating e-commerce operations, particularly by reducing the steps and timelines for online business creation. As there is an urgent need to refine the legal framework governing new activities related to the digital economy, such as crowdfunding and ride-hailing services (VTC - Voiture Tourisme avec chauffeur), in order to encourage and develop them.
SUB-SECTION 2: Necessity for revising the tax framework
E-commerce has been gaining increasing interest in recent years, continually changing interactions between economic agents (businesses and consumers). The Covid-19 health crisis has made this exchange channel the most appropriate due to the limitation of physical contacts. In this context, the 2020 finance law subjects transactions carried out electronically to a Value Added Tax (VAT) rate of 9%, whereas it was previously 19%. This measure aims to encourage e-taxpayers to formalize their operations and declarations. Paradoxically, the 2022 finance law introduced a VAT rate of 19% for online commerce operations. This contradicts both the ongoing health crisis context and the objective of encouraging economic agents to develop online commerce activities and opt for electronic payment, which would undoubtedly be one of the effective means of combating the informal sector in general.
SUB-SECTION 3: Focus on obstacles to the development of e-commerce in Algeria
Despite the rapid expansion of online commerce in developing countries, several significant obstacles hinder its progress. In the case of the Algerian economy, despite advancements in e-commerce practices, The delay in electronic transactions and exchanges remains significant compared to neighboring countries and the rest of the world. Indeed, the obstacles to the development of online commerce largely correspond to those defined for developing countries in general. These obstacles can be of an economic, cognitive, or sociopolitical nature.
1- Economic Obstacles:
Economic barriers refer to the decline in consumers' purchasing power caused by the increase in prices of goods and services, which is considered an economic factor hindering the development of e-commerce. Additionally, apart from the hydrocarbon sector, the informal sector remains dominant in the structure of the Algerian economy. In terms of commerce, the parallel market accounts for over 60% of the national market, making e-commerce unattractive to these businesses, which are discouraged by concerns about traceability. Furthermore, the unreliability of electronic power supply, inadequate technological means, low internet speed, and frequent disruptions significantly decrease the reliability of internet communication. Moreover, electronic payment faces difficulties due to the incompatibility of the banking system and the limited and hesitant use of credit cards, either because they are unavailable from all Algerian banks or due to the lack of trust that e-consumers have in this payment method. In some cases, e-suppliers refuse card payments either to avoid taxation or simply because they lack e-payment terminals.
2- Cognitive Obstacles:
Cognitive obstacles correspond to the limited knowledge of ICT in general and e-commerce in particular, both on the consumer side and the business side. It’s important to mention the resistance of the older generation to adopting technology in general. Additionally, there is a lack of understanding of the legal framework of e-commerce among consumers and businesses.
3- Sociopolitical Obstacles:
Sociopolitical constraints relate to insufficient regulatory and legislative frameworks that significantly undermine the trust of economic agents in transactions carried out through electronic channels, including e-payment.
Indeed, the legal framework would benefit from further encouraging and developing all activities related to the digital economy while protecting e-consumers and e-suppliers. Although remarkable progress can be observed in the new habits and behaviors of consumers, it remains that Algerian culture still harbors a preference for face-to-face interaction, as well as a specific psychological relationship with money and a prevalence of price negotiation practices between buyers and sellers.
Furthermore, there are obstacles related to logistics and delivery costs that increase the cost of goods and, therefore, their prices.
In the case of Algeria, there is an urgent need to improve internet access for all residents, both in urban and rural areas, in order to foster the development of digital economy-related activities.
The regulatory framework remains a crucial factor in the evolution of all digital activities, particularly e-commerce. It can either facilitate or constrain the growth depending on its sufficiency or the presence of excessive restrictions.
Although several laws have been enacted in the field of information and communication technology (ICT), including e-commerce, there are still some issues. The legal framework governing e-commerce activities is insufficient and requires revision, updating, and harmonization.
This is essential to promote electronic channels for transactions between e-suppliers and e-consumers, as well as to establish a climate of trust surrounding this activity.
Further work is needed to raise awareness among users about the content of legal texts and their clear understanding of rights and obligations to ensure the effectiveness of existing laws, particularly Law 18-05 of May 10, 2018.
The fiscal framework should also be revised to align with the goals of e-commerce revitalization and the overall diversification of the Algerian economy. This includes incentivizing investment in the digital field to successfully achieve economic diversification.
Looking ahead, it would be beneficial to analyze the link between the development of the digital economy and the growth of the Algerian economy in fundamental research. Additionally, in applied research, establishing strategic monitoring (technological, economic, legal, etc.) would allow drawing insights from e-commerce development experiences in the rest of the world.
Despite the challenges, the Algerian e-commerce market presents opportunities for new entrants willing to adapt to the market’s unique conditions. Understanding the preferences and habits of Algerian consumers is crucial for success. Utilizing strategies such as market research, customer surveys, and data analysis can provide insights into customer preferences and help tailor products and services to meet their needs.
In a market like Algeria with unique conditions and constraints, there are several alternative business models for e-commerce that you can consider. Here are a few suggestions:
Retail arbitrage can indeed be a relevant business model for the Algerian market, particularly if there are limited availability and regional preferences for certain products.
To adapt retail arbitrage to fit the nature of the market in Algeria, you can consider the following strategies:
- Identify Regional Product Preferences: Conduct research to understand specific regional preferences and demands for certain products. Focus on sourcing products that are in demand in specific areas or regions where they may be limited or unavailable.
- Establish Relationships with Local Stores: Build connections with physical retail or wholesale stores in different regions of Algeria. Propose partnerships where you can source specific products from their stores and list them for sale online. This enables you to offer unique products that are not widely available elsewhere.
- Localize Your Online Presence: Set up a local e-commerce website or utilize existing local online marketplaces that cater specifically to the Algerian market. Customize your platform to align with local preferences, language, and payment options to create a familiar and trustworthy shopping experience for Algerian customers.
- Optimize Logistics and Delivery: Focus on optimizing the logistics and delivery process within Algeria. Partner with local shipping and delivery services to ensure timely and cost-effective delivery to different regions. Streamline inventory management to minimize stockouts and delays.
- Pricing Strategy: Develop a pricing strategy that takes into account the cost of acquiring products from physical stores, local shipping costs, and local market dynamics. Ensure that your pricing remains competitive while allowing for a reasonable profit margin.
2-Niche E-commerce Store: Identify a specific niche or product category that is underserved or has limited competition in the Algerian market. Build an e-commerce store focused on offering a curated selection of products within that niche. This allows you to differentiate yourself and cater to a specific audience with targeted marketing efforts.
3-Local Artisanal Marketplace: Create an online marketplace specifically for local artisans and craftsmen to showcase and sell their products. This model promotes local talent, preserves cultural heritage, and appeals to customers interested in unique and handmade goods.
4-Subscription Box Service: Develop a subscription-based model where customers receive curated products or themed boxes on a regular basis. This can include locally sourced or exclusive items that are not easily accessible elsewhere. Customize the offerings based on local preferences and interests.
5-Peer-to-Peer (P2P) Marketplace: Establish an online platform that facilitates peer-to-peer buying and selling within Algeria. This model can connect individuals who want to sell their products or unused items directly to interested buyers, without the need for intermediaries.
6-E-commerce Aggregator: Create an e-commerce platform that aggregates products from multiple local sellers and offers them under one unified online storefront. This simplifies the shopping experience for customers and provides a wider range of options from various sellers.
To leverage the working methods that suit the nature of the Algerian market, consider the following:
-Localization: Adapt your website, product descriptions, and customer support to the local language, culture, and preferences. This helps build trust and rapport with Algerian customers.
-Cash-on-Delivery (COD) Options: Recognize that cash-on-delivery is a popular payment method in Algeria. Incorporate COD as a payment option to accommodate customers who prefer this method. Ensure clear communication about payment options, security, and reliability.
-Local Partnerships: Collaborate with local businesses, artisans, or suppliers to source products, enhance your inventory, and strengthen your presence within the Algerian market. This can also help you tap into existing customer bases and build mutually beneficial relationships.
-Customer Education and Support: Offer customer support in local languages and provide clear instructions on how to use your e-commerce platform. Educate customers about the benefits of online shopping, secure payment methods, and the convenience of your services.
-Social Media Marketing: Leverage the power of social media platforms that are widely used in Algeria, such as Facebook, Instagram, and WhatsApp, to promote your e-commerce business. Engage with the local community, share compelling content, and run targeted advertising campaigns.
Remember to stay adaptable and open to feedback from Algerian customers. Continuously analyze the market, monitor trends, and adapt your business strategies accordingly to cater to the unique conditions and demands of the Algerian e-commerce market.
obtaining specific data on people's preferences and habits in Algeria may be challenging due to limited available data. In such cases, leveraging platforms like Facebook Marketplace can indeed be a valuable strategy.