Different beat is expected on Ethiopian marketplaces

In terms of the market situation and marketplace in Ethiopia, there are many issues that need to be modernized and improved. Of these, the marketing process and implementation, which has not redeemed the time, takes the biggest portion. Paying attention to this issue will greatly help the challenging journey of the Ethiopian economy to maintain its health and move on the path of modernization.

It is very difficult to communicate and move along with the global marketing system while running a marketing application that lacks modernity. Transforming the process of how the trading practice is done is becoming inevitable in all our marketplaces. It makes the issue serious when we think of the famous foreign companies that have entered the country—and are preparing to enter—following the economic reform Ethiopia is carrying out. Eliminating these challenges in time and changing it to a modern marketing process should be one of the main issues.

Although marketing has been updating its approach and changing its focus at different times, it has not changed its basic purpose and fundamentals. Before embarking on a full-scale modern marketing transformation, there are basic mindset shifts that are necessary to enable change. In the current modern view, there are two basic processes involved in all transactions that take place in different marketplaces. The first process is ‘the way we process the transaction’ and the second process is ‘the way of paying for the transaction we have completed’. By focusing on these two processes, many countries have been able to stabilize the flow of their economy beyond speeding up their trading system procedures. We cannot say that the marketing process in a country is “modern and efficient” if these two essential processes are not radically changed and modernized.

As indicated by Tim Bosch in his article about the Marketplace, the first marketplaces were recorded around 3,000 BC, though it is believed that the existence of marketplaces goes back in time even further. Marketplaces develop and grow exponentially once trade routes were established between cities, civilizations, and later on even continents.

There are different traditional markets in different countries. These markets are commonly known as ‘open markets’ and are known for carrying goods for tourists. In addition, there are also open markets known as ‘farmers’ markets’ in developed, developing, and under-developed countries, which are known for selling agricultural products that are used for food by local residents. In developed countries, transactions in these markets are less influential and have very little coverage as compared to the overall trading system.

In Ethiopia, most of the traditional marketplaces are used for shopping on a weekly basis. Looking at their names, they mostly depend on the days of the week. The days of the markets are designated by one or two of the days of the week. It is named by the consensus of the local community or by a custom that gradually develops. Trading on these days is limited to certain hours only. During these limited days and times, the local community attends the marketplace and performs the transaction process. At the time and place of the market, the party involved in selling presents “products, goods, and/ or services” and in parallel, the party who comes to buy enters the market with money in terms of “cash”.

Most markets rely on sellers; offering their goods or services to buyers in exchange for money. It needs the physical presence and contact of the two parties—seller and buyer. It is difficult to obtain confirmation, guarantee, or other evidence for the transaction as the transaction process is based on verbal communication between the seller and the buyer. In the traditional transaction process, having a contract or sales invoice is a luxury.

Sérgio Dominique-Ferreira and two others explained in their work, ‘Role and effect of traditional markets’, published in the Journal of Global Scholars of Marketing Science (Vol 32, Issue 3, 2022), that traditional markets play a critical role in local as well as regional development and sustainability. This means that their social importance is great. Particulary in African countries, in addition to the marketing process, their contribution to social relations is very high. As many of the participants who come to the marketplaces for shopping come from faraway areas, they use the marketplaces as a gathering place for social and other purposes, in addition to shopping. ‘Equib’ can be mentioned in our country. Additionally, the market participants gather at the traditional bars located in the marketplaces and use them to exchange information by raising issues of their respective areas. It means that traditional markets are not only marketplaces. This shows us that it is impossible to destroy their existence in the name of modernization. However, if their potential contribution to the economy is not measured, their harm outweighs their benefits. Transactions in this marketplace should be identified and should not cover a huge share of the total transactions held in a sub-region, region, or country.

During the Renaissance period and the industrial revolution that occurred thereafter, the growth of production was greatly increased, and it helped the market and marketing system to continue to take shape. Between the 1860s and 1920s, mass production became the focus of the production era. In this era, simply mass-producing goods was a primary driver of sales. As the production era gave way to the sales era (the 1920s to 1940s), modern marketing began to take shape. Then marketing and its systems improved over time and became modern.

This phenomenon has left the marketplaces that we call “open markets” and created other marketplaces that are not limited by specific location. This new marketplace has modernized the transaction process and taken it to the next level.

It has created an environment where Business-to-Business (B2B) or Business-to-Consumer (B2C) meet to discuss, negotiate, and develop their bilateral relationship together.

It helps the trading parties communicate clearly regarding the way of production, place of delivery, time, price, payment, etc. in the agreements they make during the transaction process. It also helps create binding contracts, warranties, and similar business terms and conditions. It not only paved the way for the stakeholders in the market to have a bilateral relationship with each other but also contributed to a new meaning of the terms ‘market’, ‘marketplace’, and ‘marketing system’. This modernity has significantly contributed to open markets and their marketing processes being called ‘traditional’.

Transaction efficiency in a marketplace refers to the transaction process—minimizing the waste of time, effort, and money in the interactions between the parties—seller and buyer. This means the way we process transactions in any marketplace should be improved. Modernization of this process is needed to help market participants make the transaction process more convenient, less wasteful, and more time-efficient.

In the modern world, with the emergence of digitalization, it has been observed that the shopping crowd in the marketplaces gradually decreased, and now it is seen that more and more people shop online for themselves and their families. However, this modern marketing process has not been widely accepted and trusted by Ethiopian consumers, so it is still lagging behind and moving at a very slow pace.

Nowadays, traditional marketplaces or what we call ‘modern’ marketplaces are turning into eMarket spaces. Ignoring the changing process of this growing market system at the global level will slow the positive impact that marketing should bring to a country’s economy. In order to increase the speed of this process in Ethiopia and to go along with the world market system, fast and quality infrastructure should be developed. The main infrastructure of the eMarket space is the existence of the internet with sufficient speed and quality. The effort shown by the government on digital policies and strategic plans is expected to be more than what has been done on the development of internet infrastructure.

Ethiopia’s determination to implement e-commerce or e-transactions through a decree is a good start and paves the way for other processes. It enables Ethiopia to be part of the digital era. As per the Data Reportal “Digital 2022” report on Ethiopia, there were 29.83 million internet users in Ethiopia in January 2022. This means, as per the report, Ethiopia’s internet penetration rate stood at 25.0Pct of the total population at the start of 2022. If we take this data, the maximum population that may use eMarketspaces is not one-quarter of the population. This needs improvement, and the inclusion rate is expected to rise above this number in the coming years. If we look at neighboring countries with common borders with the same report, Kenya’s, Djibouti’s, and Sudan’s internet penetration rates stood at 42.0Pct, 59.0Pct, and 30.9Pct of the total population, respectively, at the start of 2022. These three countries look higher than Ethiopia, whereas Eritrea’s, South Sudan’s, and Somalia’s internet penetration rates stood at 8.0Pct, 10.9Pct, and 13.7Pct of the total population, respectively, at the start of 2022, which are lower than Ethiopia’s.

I expect Ethiopia’s rate to show a lot of improvement in the near future. Ethio Telecom’s progress in introducing new technologies in a short period of time is promising. Much is also expected from Safaricom and its new venture. In the competition between them and partnering with stakeholders, there is hope that they can significantly contribute significantly to the improvement of the marketing processes, eMarketspaces, and the development of electronic trading as well.

In order to improve the way of ‘paying for the transactions we have completed’, digital payment should get due attention. They are easy and convenient for shoppers instead of holding cash. The Digital Ethiopia 2025 strategy document clearly indicates why the digital payment process is lagging behind. It puts as “lack of fundamental enablers for e-commerce such as legal recognition of e-receipts and digital payments have resulted in a lack of a conducive environment for e-commerce development. Comprehensive policy and regulatory changes, which can create a strong framework for governance and reduce uncertainty, can help catalyze the market. In addition to solving this systemic problem, it is important to introduce the payment methods being implemented worldwide. For instance, credit cards are very important in the modern marketing system but are not issued in Ethiopia. As per the strategy document, “they are used only by foreigners and the diaspora (0.3Pct of the population). However, while peer countries such as Kenya and Rwanda have evidenced an increasing usage of mobile money as a solution for financial inclusion (73Pct and 31Pct of the population), in Ethiopia it is less than 1Pct due to regulatory restrictions.

Therefore, in general, as we can all agree and as the strategic document puts it, the combination of (i) lack of interoperability among and within banks and (ii) the public’s lack of awareness and access to digital banking services has led to very low adoption of digital payments. The few e-commerce solutions in Ethiopia depend on ‘cash-on-delivery’ transactions. Thus, this needs a lot of work, and working on both the merchant’s and shopper’s side is very important to bring them both on an equal page with regard to the way of transaction and the way of payment for the transaction.

11th Year • Oct 2022 • No. 111