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Twists in growing ecommerce business in Kenya

Twists in growing ecommerce business in Kenya

In February this year, Kenyan ecommerce startup Sky.Garden raised US$1.2 million funding from Norway-based TRK Group. It had been in the business for eight months and the funding will go a long way in building the already busy sector.

Buoyed by high internet penetration relative to most African countries as well as high speeds, comparable to world’s developed countries, ecommerce in Kenya now has over 20 companies. An opportunity to start one knocks doors every other time and more will compete in the near future. It is currently valued at sh4.3 billion.

But ecommerce in Kenya is generally beyond having a website with products for sale. Young entrepreneurs are also taking to Instagram, Facebook and Twitter to sell their wares, picking specific sectors like fashion, books, and beauty products among others.

The leading ecommerce platform is Jumia, which marked its sixth anniversary in June this year. It is owned by German-based technology firm Rocket Internet. It’s success over the years has tacitly informed other entrants in the sector, a much welcome competition even to Jumia itself.

Today, ecommerce as a retail business only controls 0.5 percent of the market, despite its huge potential.

The cut throat competition has raised stakes in the retail sector, earning the country second place on the continent, behind South Africa, according a report by Oxford Business Group. The report also goes on to explain that this rise in spending accounted for 30 percent of Kenya’s GDP in 2016. It estimated that the total retail spending was Sh1.8 trillion in 2016, according to a survey conducted by Proctor and Gamble in February 2017.

The Vision 2030 medium term plan 2013 – 2017, projects the retail sector as among the six priority sectors to make up the largest part of Kenya’s Gross Domestic Product (GDP) and to create approximately 50 per cent of total formal employment.

It is this competition that is healthy, helping to provide employment opportunities to many as it is convenient, less expensive as brick and mortar do not exist.

The edge

Safaricom’s Masoko hired Jumia Kenya staff, believing they would provide necessary take off but the majority went back to Jumia and it is struggling to compete.

Good customer service and timely delivery of goods by motorcycle riders remains the advantage that the e-commerce platforms seek against each other in gaining market share.

Trust is most important. The quality of goods delivered to the satisfaction of customers determines returning customers and referrals. Being online, shoppers easily write reviews, which influence other customers in future.

On quality for instance, platforms like Jumia have advanced their intervention mechanisms. The price guarantee initiative that they launched is that if the product is not the exact one you saw online, they would refund you on selected products and penalize the vendor.

The Guarantee, launched in June for three months covered products with manufacturing defects, dead on arrival, counterfeit or wrong items delivered. It however, excluded Consumer Goods, Beauty & Fashion items and low-cost items below Sh1, 500.

Additionally, Jumia continues to offer a free 7-day return policy, allowing customers to return products to Jumia, in a re-saleable, sealed condition. While it was free to customers and benefits vendors on the platform, selling conditions got stricter as vendors were increasingly barred or fined if they sell sub-standard products on the platform

Theft

Insiders in the ecommerce business add that theft of products is high. A vendor delivers the product to the ecommerce warehouse or office for delivery, but many being start-up who have yet to build trust among staff, vendors and customers, the product disappears before reaching the customer. The result is constant complaints which erode trust, leading some to close shop or record low business.

Promotions

Last year during the month long Black Friday, Jumia Kenya featured 500,000 different products on sale, up from 30,000 the previous year. Comparatively, offline retailers in Kenya typically have between 20,000 to 60,000 products in their stores, pivoting ecommerce as the frontier market place.

Jumia was the first company to bring Black Friday to Kenya. They offered over 8,000 products on discount and the sale lasted 14 hours. The traffic was so high that the website crashed momentarily, leading to a public outcry as shoppers jostled for deals.

In a calendar year, ecommerce platforms have to come up with a variety of promotions with discounts to entice customers. Anniversaries, free deliveries on products beyond certain prices like sh5, 000, guaranteed security, treasure hunts and payment on delivery are some of the incentives they have to roll out to be competitive.

An ordering process that is simple, reliable and user-friendly also goes a long way to smoothen purchases.

In addition, customers are interested in having an easy way of accessing other related products, comparing products and prices and having links where they can save the products for future use.

 

 


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