Kenya has one of the most vibrant e-commerce ecosystems in Africa and has shown steady growth. Exact data and statistics are lacking but revenue in the Kenyan e-commerce market is expected to result in an approximated market volume of USD 2 billion by 2024 (Statista). During the COVID-19 lockdown period even more businesses have decided to open up online shops and expected is that e-commerce in Kenya will further accelerate and grow.
Electronic commerce or e-commerce, may be categorized in Kenya as either domestic, when it takes place within a country’s borders, or cross-border, when it occurs across international borders.
Cross-border vs. domestic e-commerce in Kenya.
Cross-border e-commerce – There is a large appetite for products that are not accessible within Kenya. These products are mainly ordered via e-commerce platforms such as eBay, AliExpress and Amazon. Also export in Kenya via e-commerce is popular, there is especially a large appetite from Europe and Asia for authentic African products, predominantly sold via eBay.
Domestic e-commerce – The domestic e-commerce ecosystem has been steadily growing the last couple of years, attracting more local players, think of market places adapting to local context, but also traditional brick and mortar businesses are becoming active with e-commerce. E-commerce however has been a challenging space in Kenya due to infrastructure gaps and customers reluctancy. Other than the huge success of mobile money, physical goods need to be delivered, which require logistic infrastructure. This logistic infrastructure is lacking, making e-commerce restricted to larger cities such as Nairobi and Mombasa. E-commerce focused on selling local products like FMCG is also facing fierce competition from informal retailers and markets in Kenya.
Apart from the difference between cross-border and domestic there is a difference between B2B and B2C e-commerce, whereby B2B has taken the lead in Kenya the last couple of years. Domestic players such as Twiga Foods, a marketplace for suppliers and vendors, Sokowatch, a stock solution provider for informal retailers and cross-border e-commerce players such as Alibaba and AliExpress.
B2C is catching up with B2B and expected is that a lot more will happen in this space the coming years. Domestic players as Copia, which raised 26m series B last year, Sky Garden, Kilimall and Africa Sokoni, Jumia are transforming the space. All these players are active in Nairobi and most of them in second large cities such Mombasa and Kisumu. Some of these players also target rural areas with delivery points in addition.
E-commerce is popular among millennials, cities and certain products.
Data of Jumia Kenya from September 2019 shows that the largest group of e-commerce shoppers is 25-34 living in larger cities such as Nairobi. The top three products on e-commerce are:
However strong conclusions can not be made upon due to the lack of industry data and the different types of e-commerce models operating.
What are the drivers for e-commerce in Kenya?
Mobile connectivity improves access to internet
In Kenya, more than 4 million people are connected to the mobile internet between 2014 and 2017, increasing adoption from 16% to 24%.
According to The Mobile Economy 2019 report by GSMA, this growth was due to performance on two enablers: infrastructure and affordability. The former was driven by improved network coverage, with 3G increasing from 67% in 2014 to 85% in 2017, and 4G reaching more than a third of the population.
Online payments to facilitate transactions
Debit and credit cards such as Mastercard and Visa have a low penetration in the Kenyan market, most popular domestic methods of payments for e-commerce are:
- Airtel Money
According to the Communications Authority (CA), Kenyans performed 425.3 million mobile commerce transactions between July and September 2019. The operations imply that KES 1.6 trillion was spent to purchase goods and services online in the quarter
Although online payment infrastructure is in place, with several payment gateways providing solutions for e-commerce players to accept payments online, cash should not be underestimated, companies selling online often accept cash on delivery as payment option.
Logistical infrastructure getting in place
Kenya’s postal system can’t be compared with postal systems in more established markets and is less effective. Having this crucial component of a seamless e-commerce experience not in place puts pressure on growth of e-commerce in Kenya. However the last couple of years several private players specialized in logistics have stepped in providing the crucial last mile delivery logistic part. This space has been a hot place for investors with rapid developments. Players such as Lori Systems, Kobo360, Sendy and Amit Truck have raised millions of USD in the last couple of years. Also DHL recently introduced DHL Express, a platform which provides a standard for organising transport and logistics for e-commerce within the East African region.
Future growth of e-commerce in Kenya and Africa
To accelerate future growth of e-commerce in Kenya there are four key bottlenecks that need to be taken care off:
- Trust among consumers
- Lack of reliable data
- High shipping and delivery cost
- High import duties among East African borders thinking of clearance, fees, taxes.
Opportunities not lay only in Kenya. According to Brookings, intra-African trade is only at 17% compared to 59% in Asia and 69% in Europe. There is a lot to win here. The implementation of the Africa Continental Free Trade Agreement (AfCFTA) is expected to boost intra-Africa trade by up to 52%, by eliminating import duties and reducing other barriers to trade.
Although the uptake of e-commerce in Kenya has remained relatively low in comparison to more developed countries in the past, the expectation is that e-commerce in Kenya will further advance and develop its own model based on the charactics and demand of the market. Kenya’s e-commerce ecosystem will be an interesting thing to keep an eye on the coming years.