A friend of mine recently narrated to me how an encounter at a retail shop made her appreciate the recent innovations in mobile technology. She had gone to do some household shopping at her local shopping centre.
Since she did not have cash at that moment, she thought of walking to the nearest M-Pesa shop to withdraw an amount that would suffice whatever she wanted to buy.
To her shock, she found that all the nearby M-Pesa shops were closed and she would have to walk for a further five kilometres in order to make a withdrawal.
She quickly thought of some alternatives and concluded that since she was quite exhausted she would either have to go back to the house or convince the shop attendant to accept a transfer from her Mpesa line.
She settled for the latter and was lucky to get the necessities that she needed although she had to pay an extra amount to cater for the withdrawal charges.
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The transaction got me thinking about market penetration of mobile payment solutions among small-scale traders and how prepared they are in embracing emerging technological advancements that affect retail trade.
The retail industry in Kenya is evolving quite fast and many supermarkets are now embracing the online market solutions after realizing that they face competition from online stores such as Masoko by Safaricom, Jumia, and Kilimall to mention just a few.
This further compounds on the existing competition faced by the small businesses especially since the online stores provide delivery services.
Business transactions across many SMEs in Kenya are largely cash-based and in most cases involve multiple purchases by several consumers who buy goods of relatively minimal value compared to those in shopping malls or large scale resellers.
This is mainly because purchases are usually for immediate consumption or use on a need basis. It’s not uncommon for customers to wait for quite some time to have their balances given whenever they issue high denomination notes. Furthermore, at times customers usually leave without their “change” and are often advised to check back later as the shop attendants hover around to seek assistance from their colleagues.
This has the effect of inconveniencing both the shop owners and customers. The shop owners lose customers as they move around seeking for change while the consumer may delay meeting other equally important needs.
Besides enabling them to improve turnaround time of serving customers, mobile technology solutions can enable small-scale traders to access affordable credit. By allowing customers to pay via M-Pesa, mobile banking, and related solutions, such businesses will be better placed to improve their credit profiles.
This would enable them to qualify for short-term working capital lines from banks and other financial institutions. Access to credit will make it possible for the businesses to restock and hold optimal inventory to meet the varying needs of their customers.
Payment solutions can also enable small businesses to analyze their income and expenditure and thus better determine their monthly profitability. This will, in turn, enable them to make informed decisions that impact their bottom line.
For instance, by making prompt payments to their suppliers, SME owners can negotiate for better credit terms and discounts based on their good repayment history. The businesses will, therefore, save on their purchase costs while maintaining good relationships with their suppliers.
Additionally, having collections in a mobile money account or bank account would minimize the risk of diversion of revenue to other activities. Many small business owners are known to take advantage of new opportunities and having easy access to cash usually enables them to pursue such risks. When the business owners are empowered on the need to maintain good transaction history with the banks and financial institutions, they are less likely to be receptive to withdrawing funds for nonbusiness use.
Mobile payments solutions also enable small business owners to save on costs and time associated with sourcing for supplies and therefore their efforts will be directed towards serving their customers.
This can be done by enabling the small business owners to access a large pool of suppliers through the mobile phone via dedicated USSD platforms or mobile applications. They can then make orders and pay directly from their mobile platforms. This has the effect of ensuring continuity of business operations.
In order to empower small and micro business traders with information, stakeholders should consider using simplified mobile technologies. In this regard, feature phones come in handy because of their long battery life and affordable prices.
Additionally, communication platforms such as SMS and USSD are easy to comprehend and can be customized for a variety of uses to allow maximum benefits for the users. Mobile applications that are customized to the particular needs of the small business owners would also be convenient because of their many features and user interface. However, the cost of acquiring smartphones and related maintenance expenses may be a hindrance whenever an organization or institution wants to target a large group of people.
It is therefore important to have solutions that complement each other especially as a result of variability of energy whenever there are power blackouts.
In conclusion, mobile technology service providers and other stakeholders should consider investing in research and development initiatives that are geared towards empowering SME owners. Efforts should be directed towards identifying solutions that can better enable them to track their inventory, expenses, and income through the use of their mobile phones.
This will make it possible for the small and micro businesses to operate at optimal capacity thus improving their profitability and sustainability in the long term.
