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Shopping experience: Is e-commerce eating supermarkets' lunch?

Financial Standard
 Online sales make up only two per cent of total retail sales in Kenya. [iStockphoto]

It may have been the Covid-19 pandemic that catapulted the adoption of technology in many lines of business including the retail sector, particularly supermarkets.

While other businesses were already on this technological path, restriction of movement and imposition of curfew forced retailers to find a way of keeping their heads above water.

That meant online shopping and delivery - with retail chains such as Naivas partnering with Glovo and subsidising their charges to encourage more to opt for this option.

The pandemic even forced some to partner with well-known online e-commerce platforms such as Jumia to increase their online footprints.

Today, if you want Carrefour products, you just visit Jumia online stores.

As a result, the adoption of technology, which gave birth to e-commerce, is growing at such a pace that it appears to be no longer complementary to retail business but offering competition.

And, there is no end in sight where this sporadic growth would halt or slow down, says Retail Trade Association of Kenya (Retrak) Chief Executive Wambui Mbarire.

Mbarire says e-commerce has grown so much that one may find it difficult to draw the line between the assisting technology and the actual business. "In a matter of months, online business became mainstream and is unlikely to lose steam for the foreseeable future," she said

Mbarire sees it as unprecedented changes that no one had control over, and so they require everyone to adjust in their own way.

From her analysis, she lists four reasons that have contributed to e-commerce in the sector: restriction of movement during the pandemic, readjustments due to job losses as some organisations sought to shed off staff, shift from traditional brick and mortar way of business to online, and entry of robust tech platforms.

But as retailers are going online, some are still opening brick-and-mortar branches across the country.

Office spaces

A report by real estate consultancy company Knight Frank even described them as darlings of the sector notwithstanding that on the flip side, there is an oversupply of office spaces since many firms adopted work-from-home due to the pandemic.

"The Covid-19 pandemic certainly helped fast-track e-commerce adoption and we have seen an increase in online purchasing and retailers focused on developing their platforms, particularly in the F&B (food and beverage) space," Knight Frank said in a June 2022 report.

"Having said this, traditional retail, especially convenience-led schemes, has also seen a strong rebound in the last six to nine months off the back of easing restrictions and people's eagerness to get back to life as normal."

The report foresaw more co-working operators taking advantage of low mall lease rates and establishing bases in shopping centres.

"Elsewhere, supermarkets have emerged as a star performer. Increased sales and store expansion activity from both domestic and international players means supermarkets will remain a robust asset class over the short to medium term," the report said.

It cited Carrefour, Quickmart and Naivas whose expansion has been on steroids for the past two years.

This new normal is one of the sweet spots the government seeks to maximise with a belief that it will transform lives and how business is done.

It is the reason behind the push to have internet accessibility in all urban centres and homes. "We have to enhance infrastructure, digital skills and leverage on technology to move this country from traditional ways of doing business to e-commerce," said ICT Cabinet Secretary Eliud Owalo during the Jamhuri Tech and Innovation Summit 2022.

Horticulture sector

The push for the adoption of technology and the rush to go digital, however, leaves questions on the future of brick-and-mortar business models.

Floice Mukabana, director of stakeholder coordination and resource mobilisation at the Kenya Export Promotion and Branding Agency told Financial Standard that brick and mortar and e-commerce have to co-exist.

She said it is e-commerce that sustained businesses during the pandemic. "Actually, that is the period we were able to see growth in the horticulture sector," Mukabana said recently while signing a deal with International Trade Centre (ITC) that seeks to train 500 small businesses on e-commerce.

"The brick-and-mortar model also has space. It has its own fine details...like the B2B contact and ability to sample the goods you want to export."

ITC e-commerce and SME Digital Transformation Advisor Annabel Sykes concurred. "You may have heard of the term omnichannel, which is what the larger businesses are working towards," said Sykes.

Omnichannel is a business model where a firm integrates all the interaction methods with the market to maximise its reach.

This makes both physical and digital interactions key for businesses. "We know one of the key components of e-commerce is delivery and getting goods to the customer. That is not always easy," Sykes said.

"Sometimes, you need to have pick-up points, physical locations and doing that match between providing some elements online and retaining others physically."

She said this allows businesses to reach their full potential. A July 2021 paper titled Electronic Commerce: The Evolution and State in Kenya says one of the advantages of online stores is the adaptability of real-time trading, which is attractive to customers who regard the effortlessness and proficiency of shopping online.

Online customers

The paper lists books, electronic equipment, airline ticket reservations, clothes, accessories, shoes, visits and lodging reservations, make-up and nourishment supplies as some of the leading products being bought online in the country.

"Notably, fully online stores such as Jumia have the best allure with 33 per cent of online customers favouring them compared to the conventional brick and mortar stores and those that permit buyers to choose various items from a wide range of online stores," says the paper.

It was published by the International Journal of Research in Education Humanities and Commerce, and authored by Tunai Nafula of Kibabii University College. The paper adds that more business people are going into the e-commerce market because of the huge incomes, with estimates pointing to revenues many times higher than traditional retail stores.

It is also important to note that these incomes could be because coming up with an online shop does not require a costly foundation or high introductory speculation.

"The boat has set sail and the brick-and-mortar shop can no longer determine the extent of one's business territory and customer catchment," says Mbarire.

"It is normal to see online businesses state that they deliver countrywide. It is unsurprising that cargo and courier firms have taken note and are fast expanding the routes they serve to meet the last mile need for online sales."

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