Why Kenyan Businesses Are Going Online, And Buyers Are Following Them There

Two months ago, on our way to a meeting, my MD complimented my lip colour and asked for a referral to the shop where I had bought it from. Instead of a physical shop, I quickly sent her an Instagram link. I did not know who owned the shop, had not interacted with them in making the purchase, my only contact was with their motorbike rider, who called to inquire where our office was located so he could make the delivery.   Right after the meeting, our discussion switched to the hot weather and the effect it was having on our skins. I shared my solution (carrot and rosehip oil), and again, the referral was not a physical shop but a Facebook Page whose lovely owner not only sold natural cold pressed oils, she also gave skincare tips on the page in a tone that sounded amiable and comforting – I imagine she has a calming voice, like a spa attendant . I do not know the sound of her voice because despite buying from her for years, I have never spoken to her on the phone. When I think about my last 10 or so non-food purchases, none were from a physical shop, and most were repeat purchases.

I figured a sample of one may not be representative. It is possible that I am just lazy. I, therefore, polled my office mates who are 20-30-year-olds and their experience was no different. From hair and hair products to shirts and suits, they had all shopped online and a good experience with a particular shop resulted in total conversion from physical to online shopping.

A number of factors are driving this move to online shopping, and while not all are positive, overall the result will be good for both the customers and the vendors.

1. The high cost of having a physical business outlet. Anyone who has had dreams of owning a physical shop in a big town in Kenya will attest to the fact that the establishment costs (especially in Nairobi) usually far outweigh your investment in working capital. First, we have the rent and rental deposits. Some landlords, especially in the Central Business District, require at least 6 months rental deposit on signing. Second, we have the peculiar “Goodwill” payment which is charged even on empty shops and can be as high as a couple of million shillings. Third, are the County licensing fees, which seem to increase every year. In 2018 for example, Nairobi County included a compulsory fire license fee for every business. Building owners also pay for fire compliance (and are responsible for it), but this did not matter. Finally, we have the staffing costs of owning a physical shop. It is no surprise that many small businesses are launching online first and going offline later. It is the best use of capital, especially when launching a new product.
2. The high cost of shopping. As vendors move online because of costs, shoppers are also moving online for the same reason. The cost here is not the cost of the items but the cost of the shopping activity. City authorities seem to have given up on traffic management and as a result, a shopping expedition is likely to have you sit in traffic for longer than you wish to. Coupled with this, is the rising insecurity and lack of secure parking in the Central Business District. Should you decide to drive to a mall instead, you have to contend with exorbitant parking fees in addition to paying for shopping.  This makes online shopping the first option when shoppers want to buy just one item. It allows for comparison shopping without walking around and sometimes it could even save you money. I experienced this in December when I needed a specific bottle of wine that I knew was only available at a new supermarket, about 7km from my house,  in a shopping mall. I consulted my tweeps for online wine delivery options and was directed to at least three shops that could deliver the wine to me. The wine was Ksh 100 more than the supermarket price, plus a Ksh 150 delivery fee, but considering the fuel, parking fees and the hassle, it was actually cheaper for me to order it. It only took them 30 minutes to get to my doorstep.
3. Growth in mobile money adoption. Let us take a little trip down the memory lane. The year is 2006, I have just finished my university coursework, and I am waiting to graduate. I “hit the tarmac” and start job hunting. Along the way, I discover myjobseye.com, which is Kenya’s premier job-hunting portal. I log in, register and start applying for jobs. I do not expect much from this activity (which I do from a cyber café), but to my surprise, I get two interviews which lead to two job offers that I do not take up. However,  both the employer and I get third time lucky, because the third interview results in a job that I go on to keep for a total of about 7 years. To this day, I am not sure what myjobseye.com’s business model was, but it was free for job seekers. If employers paid, they probably needed to write a cheque to the company, and physically send it to the company’s offices for their listings to be uploaded. It sounds tiring. For the last 12 years, the landscape has changed tremendously. M-Pesa and their merchant solution “Buy Goods” has made it a lot easier to buy and sell goods online. There is still room for innovation around payments especially towards making them cheaper and seamless for vendors, and it is exciting to anticipate what will come next.
4. Access to broadband internet and mapping technology. This has been a boon for both the vendors and the buyers. The ability to browse cheaply means vendors can easily and cheaply upload pictures of their merchandise, and buyers are able to find them easily.  The second has been the mapping of our cities. While we are yet to get street addresses that would make deliveries a breeze, the mapping of our cities by Google has made them much easier. You can now send your location to the vendor, and they deliver to your doorstep – like it happened with my wine, to my great pleasure.
5. Entry of aggregators. This may be the last e-commerce accelerator that I mention, but I believe it will have the largest impact in terms of mainstreaming e-commerce especially for urban populations in Kenya. Safaricom’s Masoko is the recent entrant, and its selling point to vendors is that with a few simple steps, you can take your shop online, no matter what you sell. Their promise to customers is that they can find anything they need on Masoko.com.

The above developments notwithstanding, we are still far off from being fully online, and there are infrastructural gaps that need to be filled at government level to make e-commerce grow further in Kenya, but I am optimistic that one day, I won’t need to visit a shop for anything.

Over to you, do you shop online often?  What items do you habitually buy from an online store?

Featured photo by @@IAMCONNORRM from nappy.co