TechnologyE-commerce In Kenya, a Fad Or Not a Fad?

Stacy NjimuAugust 1, 20213810 min
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“The sooner we drop the ‘e’ out of ‘e-commerce’ and just call it commerce, the better.” Bob Willett. Fad or not a fad? This is the question we need to delve into the Kenyan market, exploring the growth and opportunities.

E-commerce, also known as electronic commerce or internet commerce, refers to the buying and selling of goods or services using the internet, and the transfer of money and data to execute these transactions. Our aim is to establish the frameworks that govern this sector in Kenya, possible tactics, and a scenario of a Kenyan trailblazer in e-commerce.

The Kenyan Government through the Communications Authority of Kenya (CAK) is committed to facilitating the growth of electronic commerce (e-commerce) in the country. According to CAK, there were 22.86 million internet users in Kenya in January 2020. The number of internet users increased by 3.2 million (+16%) between 2019 and 2020. Internet penetration in Kenya stood at 43% in January 2020. At 13.7 Mbps, Kenya’s average data connection speed is the world’s 14th fastest. It is also double the speed of the global average data connection speed. This really provides a solid foundation for online businesses to thrive and capitalize within Africa and beyond.

E-commerce is growing like a  bush fire in Kenya and other parts of Africa since it meets all buyers’ needs: Convenience, affordability, accessibility, and confidentiality. The shopping experience is more holistic and tailored through visualized curated content, hot deals, delivery at desired locations, and pay on delivery policies.

As an entrepreneur thinking of a prospective e-commerce business here lies the savvy cheatsheet. The use of chatbots is becoming increasingly popular across the chats with many companies leveraging on these to serve their customers. It has made interaction with clients easy, professional, and timely. Secondly, Conversion optimization which is a system for increasing the percentage of visitors to a website that converts into customers, or more generally, takes any desired action on a webpage is another way of increasing revenue. This can be done by simplifying the product category and having products that encourage customers to stay loyal. Most importantly establish a trusted brand with a personalized experience for each customer.

Let’s take for instance the Kenyan e-commerce giant “Kilimall” deriving its name from Mount. Kilimanjaro, the highest mountain in Africa was established with the inspiration of becoming a dominant player in Africa’s e-commerce. It was founded in 2014 in Kenya by Yang Tao, a known eCommerce entrepreneur. Their head office is located in the capital city of Kenya – Nairobi. Kilimall operates three e-commerce models, through online shopping platform, namely; FBK (Fulfilled By Kilimall) where local and global sellers are given an opportunity to store their products in Kilimall warehouses; D.S (Drop Shipping) where local merchants store their products at their own premises while selling on the platform and G.S (Global Shipping) where merchants sell their products directly from overseas.

The platform retails a wide range of products to cover home appliances, ranging from smartphones and accessories, electronic products such as computers, tablets, and TVs as well as baby stuff, beauty, and fashion products, among others. It operates a business model that covers customers both in urban and rural areas across Kenya, Uganda, and Nigeria. According to Rocket Reach, Kilimall’s current revenue is US$20.40m with a team of 29. In six years the growth has been tremendously exponential yet skillfully managed by a small team that describes the experience as a steep learning curve where one grows their skills, learns about different opportunities, and appreciates cultural diversity at the workplace.

We can also attribute its success to cheaper prices compared to competitors such as Jumia, Amazon, and Alibaba. Fast delivery for most products, a solid refund policy inclusive of shipping fees in case the product is faulty or wasn’t the item ordered, and currently killer black Friday deals this November.

The Digital Service Tax (DST) introduced by the Kenya Revenue Authority in the Financial Act 2020, implies a 1.5% tax on Gross Transaction Value. The government obligation seems quite reasonable for the profit margins obtained. Revenue in the e-commerce market is projected to reach US$1,097m in 2020. An annual growth rate (CAGR 2020-2025) of 16.4%, resulting in a projected market volume of US$2,342m by 2025.As depicted in the chart below.

Source: Statistica.com

In conclusion, As more Kenyans get conversant and reliant on online shopping, the market is yet to fully actualize its potential in the e-commerce space. What better time than now to save yourself a seat at the table and strategically position your business. As the ball game changes, may the players move with it not only in Kenya but also in the African continent and beyond since it cuts across borders.

Stacy Njimu

Contributor At Cue Africa Email address: swnjimu@gmail.com Linked In: Stacy Njimu Twitter: NjimuStacy

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