Nnachi Elijah Somto, Researcher.
Executive Summary
This article’s objective is to map the convergence of physical and digital retail in key
markets (Nigeria, Kenya, South Africa, Egypt) and in Africa as a whole.
Key Focus Areas:
- Phygital commerce: Merging physical and digital shopping experiences, the opportunities, challenges, and strategies to overcome these challenges
- Agentic AI: Autonomous customer service and inventory bots replacing reactive AI.
- Omnichannel Reality: How informal retailers are digitizing Inventory vs. formal retailers’ adoption of smart shelves.
- Founders’ Angle: Gaps in last-mile logistics tech and trust-building tools for cash-heavy consumers.
In 2011, Nigerians feared the topic of purchasing goods online. A pair of shoes ordered from a local website might never arrive, or arrive smaller than expected, or arrive in an unexpected condition. Fast forward to 2025, and the story has changed drastically. Nigeria’s e-commerce market has grown into a multi-billion-dollar industry, changing consumer behavior and influencing business success (Heckerbella, 2025).
Africa’s digital commerce has been shaped by the internet-invested population, increasing access to the internet, and digital trade becoming a necessity. E-commerce is a growing sector worldwide, with Temu and Shein expanding into Africa, and local platforms like Konga, Jumia, Takealot, and others (Oluwatumininu Adeyi, 2025).
In 2026, Africa’s retail landscape underwent a significant shift, marked by the widespread adoption of autonomous systems. The global retail industry entered 2026 with a new directive, shaped by economic uncertainty, shifting consumer behavior, and the shift to AI-driven structures (Punch, 2025).
Phygital Commerce
Phygital retail combines physical and digital channels, creating a seamless shopping experience that merges brick-and-mortar and online retail. In a phygital retail setting, customers can seamlessly navigate between physical and digital channels, allowing them to engage with products and brands through various touchpoints. Customers navigate buy-online-pick-up-in-store services, interactive fitting rooms, and virtual reality to engage with products and brands (Nicolette Mychajl, 2024).
Phygital Commerce is a strategic approach that boosts customer satisfaction and business growth. It combines physical and digital strengths, offering a more comprehensive shopping experience. As customers enjoy the freedom to shop how they want, businesses can reap the benefits of increased sales and customer loyalty (Nicolette Mychajluk, 2024).
Challenges Hindering the Potential of Phygital Commerce in Africa
Some primary challenges hindering phygital commerce in Africa include:
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Poor infrastructure
Poor infrastructure hinders timely access to goods and businesses’ ability to deliver on time. For example, in Nigeria, products often take a substantial amount of time to move from one region to another due to a lack of good transportation infrastructure. Limited access to suitable broadband connectivity hinders businesses from connecting with their potential audience. A survey reveals that 52% of African businesses identify a lack of internet connectivity as an obstacle to increasing e-commerce revenue; logistical problems also hinder revenue with slow deliveries, inflated costs, and limited market access (Pandora, 2025).
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Payment and financial barriers
42% of African businesses reported that payment gateways constrain e-commerce. Buyers in remote African settings avoid online payment due to limited digital financial services, preferring physical locations where they can pay cash or interact with sellers in person, citing fraud and cybercrime concerns. These challenges limit e-commerce businesses’ expansion and growth (Pandora, 2025).
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Lack of trust from consumers.
Rampancy of fraudulent activities. Customers’ information has been stolen and used for crimes, making buyers hesitate whenever their personal information is required in transactions with businesses. There’s also the case of what was ordered versus what I ordered vs what I got. Such cases are popular on social media and discourage customers from purchasing goods online. A survey shows that 48% of Micro, Small, and Medium Enterprises (MSME,s) identified customers’ lack of trust in e-commerce marketplaces and websites as a challenge to growing their African e-commerce business (Pandora, 2025).
Growth Strategies for Phygital Commerce in Africa
Let’s examine the various e-commerce growth strategies that can help curb these challenges.
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Mobile-First: The Essential Requirement
Mobile-first design in African e-commerce is not optional anymore; it is essential. Mobile apps deliver native experiences that work seamlessly on phones and deliver a seamless shopping experience. Mobile websites must be optimized for small screens and slow connections, working reliably even on limited internet access. Progressive Web Apps merge apps and websites, offering app-like experiences without app store downloads. This approach reduces friction. Mobile payments integration taps into existing mobile money infrastructure, making checkout seamless for consumers who use mobile money (8MB, 2025).
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Payment Solutions
African consumers use a variety of payment methods. Mobile money services like M-Pesa, MTN Mobile Money, and Airtel Money are widely trusted. Card payments work for those with bank accounts and cards. Cash on delivery option remains essential for consumers who distrust digital payments. Bank transfers are an option for those comfortable with banking. Integration requires supporting multiple payment methods, secure processing, and fast settlement to serve diverse consumers and enable e-commerce growth (8MB, 2025).
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Logistics
Last-mile delivery costs are high, and reliability is inconsistent. Unreliable logistics inflate operational expenses. Reliability issues damage customer trust and repeat business. Solutions include owning logistics infrastructure for control and reliability, partnering with logistics networks for coverage, and using technology to optimize routes and improve efficiency. Effective logistics allows businesses to deliver products reliably and cost-effectively (8MB, 2025).
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Building Trust
Trust-building methods include reviews and ratings, secure payments, reliable delivery, and responsive customer service. These methods build trust that enables e-commerce growth. Trust is an essential factor in African markets where e-commerce is newer, and consumers are skeptical. Building trust requires consistent execution (8MB, 2025).
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The Evolution and Deployment of Agentic AI in African Retail
Traditional generative AI responds to commands, while agentic AI takes action. It manages tasks from start to finish: setting objectives, determining workflows, executing tasks, and adapting to changing contexts. The difference lies in oversight: instructing an AI versus letting it operate independently (Dennis Kriel, 2025). One needs guidance; the other operates autonomously (Dennis Kriel, 2025).
Africa’s case for AI agents is compelling. Sectors like healthcare, finance, and agriculture face chronic shortages of skilled workers and high operational costs. Millions of citizens interact daily with overstretched systems that struggle to meet demand. AI agents, especially those that understand local languages, can augment human capacity and provide more timely services. In a continent of over 2,000 languages, multilingual agents can be transformative. Companies like CDIAL AI in Nigeria are building systems that understand Yoruba, Hausa, Igbo, and other African languages (African Business, 2025).
Comparative Capabilities: Generative AI vs. Agentic AI (2026 Focus)
| Feature | Generative AI (2024-2025 Era) | Agentic AI (2026 Maturity) |
| Primary Output | Text, images, and code based on prompts | Execution of multi-step goals and transactions |
| Autonomy Level | Low; requires constant human input and verification | High: acts as a semi-autonomous “closer” in the sales funnel |
| Contextual Awareness | Limited to the immediate prompt or short history | High: maintains long-term memory of preferences and tool use |
| Tool Integration | Mostly isolated within chat interfaces | Integrated with APIs, payment gateways, and ERP systems |
| Consumer Role | Product discovery and research | Searchless retail: anticipation of intent and execution |
African digital behavior will be defined by mobile-centered lifestyles, with voice-driven and multilingual agents at its core. In rural areas, where connectivity falters, edge devices will rely on AI agents operating offline or on low bandwidth. Multimodal agents will revolutionize sectors like agriculture, where a farmer can photograph a diseased plant and get instant analysis, or in fintech, where fraud detection combines behavioral text patterns with real-time identity verification. Enterprise AI agents will evolve into sophisticated organisational assistants, managing end-to-end workflows across sales, compliance, finance, and HR (African Business, 2025).
Nigeria: Fintech Dominance and the Mass Digitization of SMEs
Nigeria, a nation in dire need of real-time payment systems, has built a robust digital infrastructure, making it Africa’s leading financial technology hub (WazoPlus, 2024). The retail sector now relies on digital banking services, abandoning cash for technology-driven solutions like point-of-sale systems and digital inventory management. Nigeria’s NIBSS Instant Payment system has become the standard for digital transactions, driving instant payments to become a global standard. This system uses A2A payments, faster and cheaper than cash-on-delivery (WazoPlus, 2024; Thunes, n.d.).
The Digitization of Informal and Formal Retail
Digitization of informal retail markets is a booming global business model. The Nigerian government aims to tap into digital opportunities for increased revenue. “We want to reach the level of advanced countries, where ICT revenue surpasses crude oil,” said Kashifu Inuwa, Director General of the National Information Technology Development Agency. Digitalization of retail needs to be explored in Africa, given the population of digital natives and the increasing accessible internet quality (Guardian Nigeria, 2022).
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Informal Retail: Omnichannel Realities
Small corner stores define emerging market economies. They sell everything from groceries to mobile phone data and medicines. In Africa, they accounted for 90% of retail sales in 2016, with street hawkers making up the rest. Digitization has drawn top entrepreneurs and billions of dollars in venture capital. In Africa, one of the biggest startups is the Kenyan startup, MarketForce (Mikal Khoso, 2023).
The “B2B reckoning” is more pronounced in Nigeria, where platforms like OmniRetail have adopted asset-light models. OmniRetail owns no warehouses or logistics, using third-party distributors and logistics providers via its app. It generates profit from the fintech engine, OmniPay, which processed over $810 million in transactions in 2024 (Weetracker, 2025).
This strategy is the most realistic approach in Nigerian retail, where the focus is on leveraging available technology to coordinate existing businesses rather than building large, expensive systems from scratch (Punch, 2025; Weetracker, 2025).
- Formal Retail: Smart Shelves and Phygital Standards
Interactive retail smart shelves change the way people shop by embedding digital technology into store fixtures. But what are they, and why should retailers pay attention? They’re tech-enabled retail displays that automate inventory work, show product information in real time, and create personalized shopping experiences. Smart shelves are a significant upgrade from standard shelving, offering a flexible, efficient way to run stores that benefits retailers, brands, and shoppers. This solution is key for retailers who want to update their operations and keep up with changing demands (Alexandra Gavrilova, 2026).
Retail is in constant flux due to shifting customer habits, supply chain disruptions, and technological advancements. In this competitive market, where big-box chains, supermarkets, and e-commerce platforms compete, physical stores must innovate to stay relevant. Smart shelves transform the physical store into a data-rich, interactive space rivaling online shopping’s convenience and personalization (Alexandra Gavrilova, 2026).
Nigeria’s Retail Tech Strategic Pillars for 2026
| Pillar | 2025 State | 2026 Projection | Causal Factor |
| Payment Ecosystem | Dominated by A2A (NIP). | Ubiquitous invisible payments. | High Gen Z smartphone penetration (WazoPlus, 2024). |
| B2B Strategy | Full-stack logistics. | Fintech-led orchestration (Weetracker, 2025). | Margin pressure & funding constraints (Weetracker, 2025). |
| SME Tech Adoption | Fragmented HR/Accounting. | Streamlined “WorkFlowsHR” (Kareem, 2026). | Need for productivity & compliance (Kareem, 2026). |
| Industrial Tech | Import dependency. | Local semiconductor fabrication (Punch, 2025). | Focus on energy-efficient chips for local use. |
| Security | Reactive fraud detection. | AI-powered proactive defense (OECD, 2025). | Sophistication of digital threats. |
Last-Mile Logistics: The Micro-Fulfillment Revolution
Across four markets – Nigeria, South Africa, Kenya, and Egypt – last-mile delivery drives customer satisfaction, brand integrity, and repeat business (FleetRabbit, 2025). In Africa, the last-mile sector evolves rapidly despite challenges. In Africa, the last-mile sector evolves rapidly, with logistics providers rethinking delivery models and leveraging tech to overcome inefficiencies (INTER-SPED, n.d.).
Digital mapping tools like What3Words and Google Plus Codes guide drivers through unmarked areas. Real-time tracking and AI-driven route optimization give customers and logistics operators unprecedented visibility, improving delivery predictability and accountability. Micro-warehousing shortens delivery distances, reduces turnaround times, and optimizes fuel use, particularly in congested areas. This model is particularly useful in South Africa’s major metros, where congestion is common (INTER-SPED, n.d.).
Crowdshipping networks, where independent couriers or local drivers handle small deliveries, provide flexibility and reach into previously hard-to-access zones. Smart lockers and pickup points reshape how goods reach customers. Electric and hybrid vehicles are also beginning to appear in select urban areas. Electric and hybrid vehicles are appearing in select urban areas, with pilot programs proving they can lower operating costs and support greener logistics in high-density corridors (INTER-SPED, n.d.).
Micro-Fulfillment Centers (MFC) vs. Traditional Logistics (2026)
| Factor | Traditional Warehouse | Micro-Fulfillment Center (MFC) | Advantage |
| Location | Suburban/Industrial. | Urban Center (3-5 miles from the user). | Proximity to Demand. |
| Picking Efficiency | 15–25 orders/hour. | 60–80 orders/hour
(FleetRabbit, 2025). |
3x Throughput. |
| Last-Mile Cost | High (Long distances). | 35% Lower (FleetRabbit, 2025). | Margin Protection. |
| Delivery Time | 1–3 Days. | Same-Day to 2 Hours (FleetRabbit, 2025). | 40-70% Faster. |
| Customer CSAT | 3.4/5 baseline. | 4.7/5 with MFC (FleetRabbit, 2025). | Loyalty Driver. |
| Failed Deliveries | Moderate (10%+). | 20% Reduction (FleetRabbit, 2025). | Cost Savings. |
For freight forwarders, success in last-mile delivery across Africa depends on strategy, not scale. The key lies in blending technology with local insight. The key lies in blending technology with local insight, forging strong partnerships with regional couriers and community-based operators who know safe routes, potential delays, and informal delivery environments. These partners maintain diverse fleets: compact vans and electric scooters in cities, 4×4 vehicles for rural routes. Data analysis plays a key role, using route analytics, delivery tracking, and performance metrics to pinpoint bottlenecks and anticipate demand fluctuations. This analytical mindset turns the last mile into a competitive advantage. Deliveries are scheduled during daylight hours, with live tracking and insurance-backed coverage for high-value or temperature-sensitive goods, protecting cargo and reinforcing customer trust. These measures protect cargo and reinforce customer trust (INTER-SPED, n.d.).
Trust-Building Tools
Trust is the most valuable asset in e-commerce. The moment a shopper lands on a store page, they subconsciously assess whether it is a safe space and worth purchasing from, especially when it involves sensitive data like credit card information or personal details. As customers become more selective, trust is no longer optional. It determines whether someone completes a purchase, returns, or recommends the store (Barbara Bartucz, 2025).
In 2026, this is being addressed through sophisticated trust-building tools, including digital escrow, secure account-to-account payments, and biometric authentication (Thunes, n.d.; Coherent Market Insights, 2025).
The Middle East & Africa software and secure code escrow market is projected to reach $5.91 billion by 2032, reflecting the growing importance of protecting digital assets and ensuring continuity of service (Coherent Market Insights, 2025).
The Evolution of Alternative Payment Methods (APMs)
Alternative Payment Methods, including mobile money, digital wallets, and account-to-account transfers, now account for 69% of total transaction value in key African markets (WazoPlus, 2024).8 Digital wallets are poised to dominate checkout experiences by 2026, shifting focus to a “wallet-first” approach (Brite Payments, n.d.).
Furthermore, “Pay by Bank” options are capturing mainstream acceptance across all demographics due to zero consumer fees and the speed of refunds, which consumers now value more than instant transaction visibility (Brite Payments, n.d.).
Escrow and Secure Payment Service Pricing (MEA 2026)
| Service Item | Typical Price (USD) | Usage Trend |
| Setup/Onboarding Fee | $995 (One-time) | Standard for B2B. |
| Annual Software Escrow | $1,500 – $2,995 | Risk Mitigation focus. |
| SaaS Escrow (Comp.) | $5,000 – $10,000 | Cloud continuity. |
| Account-to-account Transaction Fee | < 1% | Lower than card networks (Thunes, n.d.). |
| Biometric Auth Integration | Tiered Subscription | Security requirement. |
Navigating the 2026 Retail Frontier
The retail tech landscape of 2026 is marked by a shift to quality, with execution taking precedence over flashy tech (Dabo, 2026; Publicis Sapient, 2026). Those who’ve made the leap are the winners in this new era; AI initiatives are now integral to the core (Dabo, 2026). The path forward for the “Big Four” economies hinges on the strategic convergence of four key pillars:
Autonomous Operations: Embedding agentic AI into every layer of the business, from warehouse robotics to autonomous shopping agents that represent customers (Bain & Company, n.d.; Retail Systems, n.d.).
Asset-Light Orchestration: People are shifting away from physical assets, turning to digital platforms to coordinate scattered retail and logistics resources (Weetracker, 2025; OneRail, n.d.).
Hyper-Local Fulfillment: Leveraging urban micro-fulfillment centers and “community anchor” shops to meet the same-day delivery expectations of a Gen Z-dominated market (BCG, 2025; FleetRabbit, 2025).
Regulatory Alignment: Leveraging AfCFTA frameworks to scale across borders and tap into the $72 billion digital commerce opportunity (WazoPlus, 2024; CAM EPI, 2025).
As digital services spread, the connection between infrastructure and productivity sharpens. By 2026, retail tech is no longer a supporting function, but a driver of resilience and growth in the continent’s most dynamic markets (SA Profile Magazine, n.d.). Balancing AI power with human-led context and trust-building security will define the next decade of African commerce.
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