How e-commerce is creating opportunities in businesses

Innovative solutions in e-commerce have added value to online retailers. [iStockphoto]

Global e-commerce numbers have been rising year on year. In Kenya we have seen a number of people embracing online retail as a preferred way to shop.

Innovative solutions in e-commerce such as fulfillment services have further added value to online retailers as well as consumers.

Don Okoth, the General Manager at Sendy Kenya gives more insight about e commerce, fulfillment and logistics.

Don Okoth General Manager at Sendy Kenya. [Standard]

1. Social commerce has really grown in the country over the last few years, what are some of the factors that have led to this surge?

This steady annual growth of social commerce across the country – and generally the continent – has primarily been driven by a number of factors such as increased internet use and increased consumer needs.

As at January 2021, we had over 11 million social media users in Kenya. This represented a 25 per cent increase compared to the previous year, and is projected to keep growing at a steady rate. In addition to enabling users to connect and share information, social media has created a platform for its users to conduct business. Whatsapp, Facebook and Instagram have created opportunities for both budding and established entrepreneurs to grow their businesses, and changed trade as we know. This change could even be labeled as the fourth industrial revolution, given the high number of entrepreneurs making most of their sales using social media.

In addition to increased social media usage, there is an increased number of e-commerce consumers. Out of Kenya’s ~55 million population, approximately 5 million of those are e-commerce regulars. These customers prefer convenience and would therefore prefer getting their items at the click of a button, rather than going into stores. They save on time spent going to stores and can shop from the comfort of wherever they are, which are two key components of increasing customer needs.

The Covid-19 pandemic further fueled the growth of social commerce. The changing consumer behavior meant that most consumers opted to stay indoors and make their purchase decisions online, causing a number of businesses to embrace social media as a critical platform to sell their goods.

2. What has been the role of technology in the growth of social commerce?

Tech has been a key driver in the surge of social commerce. The uptake of tech in daily business operations has enabled customers to better engage with business products and also share products within their social circle. This has not only created more brand awareness for businesses, but has also increased channels through which brands can engage with their customers.

By enabling more customer engagement, tech has also enabled businesses to get more valuable insights and data about consumer preferences. Through this, businesses can make data-driven decisions, provide products and services that are relevant to their customers, curate better customer experiences, and better approach new customers.

As opposed to physical stores, tech has made it possible for businesses to integrate their online process to complement their offline sales. In this way, businesses have multiple sales channels.

3. What are some of the challenges affecting the growth of e-commerce in Africa?

Despite the exponential growth of e-commerce in the continent, there are still a number of pressing factors that hinder the e-commerce sector from realizing its full potential. Different countries have their own unique challenges but there are those that are similar across many countries, namely: fragmented logistics and customer mistrust in online transactions.

Despite being a key enabler in trade more often than not, logistics on the continent is expensive and unreliable. To get a premium and efficient service, a business has to allocate a large budget for logistics services – which should not be the case. Further, cross-national logistics are not well-organized, making it difficult for cross-border e-commerce activities to thrive.

Customer mistrust in e-commerce has inevitably deterred potential buyers from conducting their transactions online. This trust issue has been generally observed in the form of customers not trusting that they will get the right items from the sellers, and also the uncertainty of their data safety - specifically with payment information. 

Key players in the e-commerce industry understand these challenges, and aim to partner with other players in the ecosystem. Thus, we are seeing the growth of the fintech and logistics tech companies.

4. What is the role of the government in supporting trade, especially in emerging markets?

Governments all over the world have the responsibility to create an enabling environment that will spur the growth of businesses and trade in general. Many governments do this thorough policy formulation, infrastructure development, providing security, opening up markets, creating strategic partnerships and many more.

In Kenya, the government supports e-commerce trade through its ministries including – but not limited to – the Ministry of Trade and Industrialization, Ministry of ICT, and Innovation and Youth Affairs. Furthermore, the government has not only created a favorable environment for both businesses and consumers, especially with consumer protection regulations.

5. What's the future of e-commerce?

Globally, the e-commerce sector is expected to grow, all conditions held constant. Kenya is not left behind either; the country’s annual growth rate between 2022 and 2025 is projected at 7.58%, leading to a projected volume of USD4.5bn by 2025.

With these positive projections, it is also expected that there will be continued investments in logistics and e-commerce last mile fulfillment solutions.