Online sales gather steam as firms look to cut costs

Wednesday November 29 2017

Jumia managing director Sam Chappatte (right) awards Charity Wairimu of Ruiru with an exclusive Huawei Mate 10 phone she won when Jumia Black Friday, a one-month sales extravaganza,  kicked off on November 3. PHOTO | NMG

Jumia managing director Sam Chappatte (right) awards Charity Wairimu of Ruiru with an exclusive Huawei Mate 10 phone she won when Jumia Black Friday, a one-month sales extravaganza, kicked off on November 3. PHOTO | NMG 

By CONSTANT MUNDA
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Kenya’s retail space is gradually evolving with more and more firms rejigging their marketing and distribution strategies to include e-commerce networks.

Companies are sinking millions of shillings into online distribution channels in a bid to tap a growing class of consumers who prefer deliveries at their doorsteps, thanks to high-speed internet connectivity and affordable smartphones.

Established enterprises are increasingly embracing online distribution channels, unlike in the past when the online retail space has been dominated by small-scale traders dealing mostly in electronics, phones and home appliances.

A survey released by the Kenya National Bureau of Statistics and Communications Authority of Kenya on April 26, this year, indicated that large and medium-sized enterprises are embracing e-commerce platforms more than micro enterprises.

The Enterprise ICT Report 2016, based on findings of a poll done between February and May 2016, found about 47.5 per cent of the survey companies invested in e-commerce platforms in 2015. Two-thirds of micro enterprises in the survey reported they did not engage in online deals.

“The highest proportion of enterprises that engaged in online purchases was large firms at 43.9 per cent. About one quarter of micro enterprises engaged in online purchases,” the report states. “Large and medium sized enterprises had the largest proportion of firms selling online at 31.8 per cent and 31.7 per cent, respectively.”

Giant online retailer Jumia says rising number of large and medium-sized firms, which are embracing digital distribution channels, has lifted consumer trust in online retail space.

A Renault KWID car from Simba Corp was, for example, sold for Sh850,000 – a price the motor dealer said was a 30 per cent discount off its market value –? in the ongoing month-long Black Friday sales by Jumia which started on November 13.

“This shows great levels of trust from customers transacting online,” Jumia managing director Sam Chappatte said.

The most-valued product on sale in the Jumia Black Friday sale, however, remains an apartment in Nairobi’s posh Kilimani suburb worth Sh19.6 million, a 10 discount off the market value.

Patricia Gakure, the marketing manager for Black and Decker West and East Africa, said the US-owned maker of power tools and home improvement products, including kitchen appliances, has started getting online orders for products which have not been stocked in local stores after it ventured into digital space.

“We have managed to sell out high-quality products that were not available even in the stores because our customers were able to access them online,” she said. “Delivery is one of the biggest challenges that we have, but we are able to overcome them. Again, it is because we as are still very traditional in how we do our deliveries where you find orders are already pre-done based on our retail networks.”

Tuskys Supermarkets in February inked a deal with Jumia in a bid to boost, among others, furniture, electronic appliances and baby products deals. Tuskys supply chain manager Daniel Muya then termed the online space as the “next frontier to watch out” for retailers.

Micro enterprises are largely driven to online platforms because of higher cost of operating brick-and-mortar retail stores, said Mr Evans Maina, who runs E&J Enterprises, SmartGear and Smart Hub International shops on Jumia platform.

He said the online platforms provide a wider countrywide market with courier services used to deliver orders outside Nairobi metropolis.

“You are looking at people far and wide.? For example, I am able to sell to people in Mombasa, Kisumu and other parts of the country which will not have been accessible if we only relied on our shop. It also reduces the cost of operation because you don’t have to hire additional space as you can use your own house to store your products, you also don’t pay for rent, licences and labour.”

Ms Gakure said Black and Decker, a fairly new entrant into online retail space, was looking at investing in a dedicated store to deal with online deliveries, order processing, warranty issues and returned goods.

In the ongoing Jumia Black Friday sales, Unilever’s Blueband margarine and diapers have been the stand-out popular products on offer in the first two weeks of the annual extravaganza.

Mr Chappatte said fast-moving consumer goods are more popular this year “perhaps owing to the long two-month school holiday as parents save on most consumed items at home daily”.

Jumia has broken away from traditional Black Friday sales, especially in the West, which take place on the fourth Thursday of November, by having a month-long showcase. Black Friday has since 1952 been used to mark the beginning of Christmas shopping season in the US.