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E-commerce blow to Kenya as Kalahari site shuts down

BUSINESS
By | Oct 26th 2011 | 3 min read
By | October 26th 2011
BUSINESS

By Jevans Nyabiage

Online business transactions in Kenya suffered a big blow after electronic commerce site Kalahari.co.ke was shut down.

South African media giant Naspers through its Internet arm MIH shut down the e-commerce site due to low margins.

Kalahari, an online store, which borrows its concept from the world’s largest e-commerce platform—Amazon, allowed Kenyans and those in the diaspora to purchase†products online.

"Following a strategic review of investment priorities, we will be closing down the Kalahari Kenya and Nigeria operations with immediate effect," said Stefan Magdalinski, General manager, E-commerce, Sub-Saharan Africa for MIH.

The demise of Kalahari online retail service comes just two years after its launch in Kenya.

The Nigerian operation, launched in January 2010 has also been closed.

"This was pioneering work which carried considerable risk," Magdalinski said.

"As the performance of the service has been below expectation since launch and reaching profitability was not a reasonable near-term prospect, a decision was made to refocus efforts on other group businesses within the region," Magdalinski said.

The site is said to boast of 14 million users and over 3 million products and services listed.

MIH also runs two other online businesses in Kenya–Dealfish, classified ads†site and Mocality, online business directory,†two†sites that†Magdalinski says will continue to operate for now.

Online shopping

Analysts say the main trouble with online businesses is that Kenyans are yet to trust online shopping. Many go online to look for products that cannot be found physically in traditional outlets such as supermarkets, just as a last resort.

In the past the biggest issue that online business players have had to grapple with is lack of a payment gateway.

The adoption of credit card has been low in Kenya, although there has been an attempt to incorporate mobile money payment platforms such as M-Pesa into online shopping.

Besides high costs of online transactions, the use of offshore gateways had meant local businesses could not immediately receive the cash, making them incur heavy losses in the event of exchange rate fluctuations.

Last year, I&M bank launched a local e-payment platform in partnership with VISA, aimed to localise the online payments system by providing Kenyan firms with a local gateway to receive money from any corner of the world.

Although a number of gateways have been launched, many are yet to gain considerable mass adoption and trust.

PesaPal, which enables mobile-to-web payments, is slowly bridging the void in the mode of online payment both local and international.

One of the oldest e-commerce sites in Kenya is†MamaMikes.com†which has been largely focused on the diaspora to whom it sells goods and services for friends and family in Kenya.

The closure of Kalahari comes just slightly over a year after Nasper’s Media24 shut down East Africa Magazines (EAM), publisher of popular magazines True Love, Drum and Move citing low revenues and high costs.

EAM had earlier terminated the publication of Adam, a men’s magazine and the travel and tour magazine, Twende, citing high cost of production and sluggish revenues.

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