Kenya’s Rapidly Growing Ecommerce Market Is Getting Formalized And This Is A Great Thing

My first Kenyan e-commerce experience was about six or seven years ago. A Facebook friend invited me to Like a business page that proudly called itself, “Lucia’s Mitumba Camera Shop”. In second-hand clothes speak, “Camera” is the first selection traders make right after the clothes bale is opened. It is a bit pricey because the items are usually as good as new. I was fascinated because this business did not pretend to be something it was not. It did not use fancy words like “thrift” or “pre-owned” (which some second-hand shops use so that they charge you a premium) it was a “Mitumba” shop, for the ordinary Kenyan.

I Liked the page and since then, Lucia has been my duvets vendor. Our relationship has outlasted countless changes in Facebook’s algorithm for business and thanks to her, I have more duvets than I need and would have otherwise bought if I had to go hunting for “camera” in Gikomba myself.

In many economies, the transition from brick and mortar to online is usually structured. The big businesses with budget for complex inventory management systems and vast server resources shift their stores online (voluntarily or when disrupted by fellow behemoths like Amazon), then with time smaller players fit in or are fitted into the equation. An example of this is the development of the Amazon Marketplace which has enabled vendors to sell their wares on Amazon.com. A second example is the proliferation of businesses selling e-commerce templates for cheap that have made it possible for small businesses to quickly go online.

In Kenya, the opposite is true. It is the mwananchi, the user,  who has time and time again guided big business on where to innovate. There are many stories on how it came about but an oft-repeated anecdote is that the M-Pesa opportunity became obvious when Safaricom realized that enterprising Kenyans had innovated a money transfer service; sending each other airtime in lieu of money transfer, using Safaricom’s newly introduced airtime transfer (Sambaza service).

Today, several years after my e-commerce experience, we have thousands of small online businesses fulfilling a variety of needs for clients. In the last one week, I have encountered a spare parts seller who is exclusively on Telegram, a premium lingerie Instagram shop, imported lipstick dealer who capitalizes on their Facebook presence, and a shoe vendor who mainly uses Twitter – all shops that do not have a physical presence.

However innovative and creative they may be, these small-scale businesses are not very efficient for both the vendors and the customer.  A social media business page is a communication product that is not tailored to e-commerce. E-commerce requires specialized technology for inventory management and client account management. In addition to this, social media pages subject to the whims of the parent company, which often conflict with the objectives of these small businesses – an example of this is the current development where Facebook is limiting user exposure to adverts and business posts.

Technology aside, there are logistical challenges that make this endeavour costly. Without huge daily volumes, courier costs make buying products online more expensive than from the physical shops. This cost also limits the items that can be moved online to high value, high-cost products; in a country where low-value products generate most business volumes.

Finally, one user can only Like and actively keep up with so many business social media pages, before getting overwhelmed.

The natural solution would be for these businesses to each shift to individual e-commerce sites, but then this introduces the challenge of attracting and retaining traffic in their “small business” websites. It also does not solve the offline inefficiencies.

This is why it is exciting to see brands like Jumia and Safaricom’s Masoko leveraging their brands to establish online marketplaces. They are offering our small businesses an opportunity to aggregate and tap into their market base, without the limits presented by social media pages. These platforms give the products more visibility, aggregate logistics and customer service, leading to better service delivery and lower total costs, and have minimal setup costs for the small businesses.

It is still early days and a lot still needs to be done to get many more Kenyans to shop online.

1. Establishing a trust culture. We have had instances where e-commerce vendors use stock photos provided by their suppliers in Asia, only for them to supply an inferior product to customers. Both vendors and aggregators need to invest in the right systems to verify the quality of the products being delivered. The customer should get what they see online.
2. Keeping to the service delivery promise. Once a business moves from an owner-managed social media page to an e-commerce site, there is the risk that service delivery will deteriorate. I experienced this when my favourite restaurant outsourced their delivery service to an online food delivery company. Delivery times were extended from 30-45 minutes to 60 minutes and most recently, I cancelled the order when 1.5 hours later I was still waiting for the food. I will not be ordering food from that outlet anymore. The challenge for Masoko and the others will be to ensure that all their third party service providers (call centre agents, couriers etc), adhere to a service ethos that is customer-centric. Otherwise, customers will revert to their trusted physical shops.
3. Making it even cheaper to make deliveries. Currently, delivery costs around Nairobi range between 150 to 300 shillings. There is room to bring these costs even lower in two ways. First, by having collection centres in high traffic areas, such as the Central Business District and the popular shopping malls. This would give customers the option of paying a minimal fee to have their order delivered to their collection centre of choice. The second would be for the companies to establish fulfilment centres to compliment centralized warehousing facilities, only possible with huge volumes.
4. Better stocks visibility. Nothing is more infuriating than after having placed the order, being informed it is out of stock. While the existing e-commerce businesses are working on this, it is still a long way from the desired state

Online marketplaces are coming at the right time when Kenya’s internet penetration is at an all-time high and is getting cheaper, though we are a long way to universal, cheap internet access. It will lead to more opportunities for business people, create employment, and make shopping a smoother experience for shoppers.