A few years ago, one would easily dismiss the assertion that e-commerce would one day kill off “brick” and “mortar” retail as lazy thinking. The developments within the retail sector especially during the festive season have, however, brought forth the heft and impact of online shopping in the country.
Long queues, which used to be a main feature at supermarkets are no longer there. A fraction of those who would have queued can now order and pay for goods to be delivered in the comfort of their homes or offices – just with a click. And the goods available for online shoppers are varied – from clothes to foodstuffs, car spare parts to mobile phones.
Recent developments within the Kenyan retail sector and the digital space shows digital commerce has taken off. The momentum for the growth is unstoppable and the potential is huge.
A joint report by the Communications Authority of Kenya and the Kenya National Bureau of Statistics found that more firms, about 27%, sold their products online. The report also found that, for most enterprises, 32.1%, the main deterrent to online selling and buying was the fact that their products were not suited for sale via the Internet.
A pointer that there is a huge potential and steady momentum for growth in e-commerce is evidenced in the number of young people who are starting online businesses. Most youths find it much easier to do business online unlike the brick and mortar enterprises where huge financial outlay is required to set up the infrastructure.
It is Kenya’s huge potential for ecommerce that attracted the founder of Alibaba Group Holdings Limited, Jack Ma. The Group provides the fundamental technology infrastructure and marketing reach to help merchants, brands and other businesses to leverage the power of the Internet to engage with clients and Jack Ma’s visit to Kenya and Rwanda highlighted the importance of the two countries as emerging digital powerhouses in Africa.The Government has shown great support for innovation and entrepreneurship and continued to build structures ready for every investment opportunity especially in the ICT sector.
The potential for the growth of ecommerce is underlined by success mobile payment platforms success as M-Pesa, M-Shwari and M-kopa.
A lot of funding is also being committed in developing Mobile ICT startups, which creates a fertile ground for the growth of ecommerce. Such funding has been channeled by corporate organisations like Safaricom. Sendy, which offers a marketplace for last-mile package delivery and logistics services, allowing customers to send packages and documents using a mobile application that connects them to motorcycle riders, and drivers of vans and pickup trucks was the first startup to receive funding from the $1 million Safaricom Spark Fund. The fund aims to support mobile ICT startups and enable the development of innovative mobile solutions.
It is therefore no longer a half-truth that e-commerce is informing how we shop and is increasingly outsizing the impact of traditional retail. This is even more evidenced from the rising number of online shopping malls while traditional supermarkets, which just a few years back were rapidly expanding into our neighbourhoods are struggling to break even.
Nakumatt, once the largest retail chain in Eastern Africa is now on its deathbed having shut several stores across the region while efforts to bail out Uchumi, another market giant, have not borne any fruits as the shelves are going empty by the day.
After posting an after-tax loss of Sh2.8 billion last year, Uchumi successfully lobbied for a government bailout of Sh1.8 billion to support its operations, a move that saw the state disburse the first Sh500 million in January last year. Another phase of the bailout was rolled out recently, but this too may not help much for the retailer.
As physical retail giants struggle to stay in business, online shopping malls are making a kill with more players entering the digital space to cash in on the readily available Internet savvy shoppers. The entry of the largest and most profitable telecommunications firm, Safaricom, into e-commerce market with its platform Masoko should give physical retail chains more reason to worry about their future.
Already established e-commerce players in the country include Africa Internet Group’s Jumia, Kilimall International and OLX, a unit of Johannesburg-listed Naspers Ltd.
With the Internet connectivity in Kenya hitting 60% while the penetration of formal retail is estimated at 30%, the number of Kenyans buying goods online is expected to grow. Currently the fraction of online shoppers is estimated at 0.5%.
The reason why more players are entering the ecommerce scene is the high turnover it offers with estimates pointing to a turnover as high as 25 times over the physical retail stores. It also has lower overheads because it doesn’t require expensive infrastructure to set up.
Other benefits of selling and buying online include saving time and money. It also gives shoppers a variety to choose from hence they can get better quality products.
However, ecommerce players will still have to deal with issues of trust to be able to beat competition, as many Kenyans still do not believe in buying goods online.