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E-shopping: Is Kenya ready for business?

June 7, 2007 • Top Stories

By Pauline Wangui

Business on the Internet is booming the world over although Kenya, just like other developing countries, is yet to reap from the wave.What is e-Commerce and what is hampering the growth of online business in Kenya?

Usually associated with buying and selling over the Internet, Web shopping, however, is only a small part of this revolutionary phenomenon as it also refers to online stock and bond transactions or even buying and downloading software without ever going near a store.

In addition, e-Commerce includes business-to-business connections that make purchasing easier for big corporations. It also includes the so-called micro transactions that let people pay small amounts—a few cents or a few dollars—to access online content or games.

Statistics show online retail purchases exceeded $100 billion in 2006 the world over.

This shows that there is a confluence of demand, technologies, customers, and changes in how people live their lives and is now creating a thriving digital marketplace.

Benefits of e-Commerce

E-Commerce offers many advantages over traditional paper-based commerce. It provides the customer with more choices and customisation options by better integrating the design and production processes with the delivery of products and services.

It decreases the time and cost of shopping and expands the marketplace from local and regional markets to national and international markets with minimal capital outlay, equipment, space, or staff. It permits for just-in-time production and payments.

Businesses reduce overhead and inventory through increased automation and reduced processing times. High transportation and labor costs of creating, processing, distributing, storing, and retrieving paper-based information and of identifying and negotiating with potential customers and suppliers are drastically reduced.

Through automated information, e-Commerce enables production of reliable, shareable historical database of design, marketing sales, and payment information.

One great thing is that due to automation, it facilitates increased customer responsiveness; including on-demand delivery. Online money transactions can be useful, easing the administrative burden on the customer service answering information based enquiries currently common. Monetary transactions can be processed. Billing can be done instantly electronically, conducted and monitored.

Ideal Consumer Scenario

Ann gets an e-mail inviting her to a formal dinner tomorrow. Unfortunately, she does not have a dinner dress. She visits her electronic yellow pages, searches for dinner dress retailers, and finally finds one to her liking.

It allows her to customize the design online and the retailer promises 24-hour delivery to any location in Kenya.

Ann is then prompted to make a selection and to insert her Visa Card into her PC reader, which issues a payment transfer from her credit card account to the retailer‘s online merchant account. The retailer receives the order and payment and orders a courier service for pickup and delivery of the dress that same afternoon. At 8:00 the next morning, Ann arrives at her office. Within two hours, a courier messenger arrives at the office with the dress. Ann receives dinner dress in plenty of time for the evening’s formal dinner.

Current status in Kenya

Today, very little business is transacted online in Kenya. The current scenario looks like this: You book or buy anything online in Kenya by only sending an enquiry and you in return receive an email from the business. No money is transacted online to a Kenya online Merchant account. The sad truth is that for any e-Commerce cycle to be complete, a payment transaction must take place. There is an urgent need to move from information to transaction. Today, the online needs of the business community are often solved through information only websites, which lack transactional capacity and still requiring further follow-up by sales or customer service team which is not a guarantee.

These tasks could be simplified using a single platform or solution, which permits transaction.

Untapped potential

E-Commerce has great potential to expand markets, productivity and competitiveness.

Kenya’s competitive edge is Agriculture, Manufacturing, Tourism (Tours & Travels), Arts and Handicrafts, Hotels and Restaurants and Shipping sectors.

There are indicators that e-Commerce would pick up very fast in the country as there is increased awareness. There is an increase in the number of credit card holders and users each month.

Barclays bank, having opened up its products much earlier, is reaping the benefits from these products. Other commercial banks are equally following suit, and have made great leaps in the last few months in getting people to access credit facilities.

It is projected that by June 2007, the total number of credit card users will have increased and surpassed the current number of about 100,000 if the pace of subscription remains the same.

There are more than 1 million debit cards. This forms the basis upon which e-Commerce could be developed, improved and sustained. Key businesses in Kenya appreciate the role websites play in marketing and advertisements and its potential to reach a globally wider population.

Impediments of E-commerce

Despite the above, e-Commerce has not taken off in Kenya strongly due to among other things, the absence of enabling legislation.

At the heart of the matter is the government’s failure or slowness to address ICT Policy and strategy in a cohesive and comprehensive manner, which would have provision for an e-transactions bill.

The current ICT Draft policy is still being said to be lacking in many areas and many players agree that certain provisions need to be incorporated to support E-commerce, and a framework provided of its likely date of implementation.

This is true as there is no clearly defined strategy and day-to-day activities by government that is compact and indicative enough on a common vision for the country.

Kenyan businesses are unable to reap the benefits of†e-Commerce due to lack of†local online payment facilities. Banks have been adamant to introduce the systems otherwise known as online payment gateways.

Lack of†financial transaction capabilities

Developed countries, including South Africa and Egypt, have turned Internet presence into billions of dollars, as Kenyan firms just watch.

Businesses have been hampered†by lack of†financial transaction capabilities instituted by banks, and failure to understand the opportunities of online business.

Banks, however, remain a major impediment to e-Commerce ventures. The presence of broadband internet technical expertise, a growing number of people with computers and debit and credit visa cards are indicators that Kenya is ripe for e-Commerce but unless the banks do their part, e-Commerce will still be a far fetched dream.

E-Commerce won’t take off without the support of banks in facilitating online transactions. For online transactions to take place, local banks need to start issuing online merchant accounts. An online merchant account allows business owners to receive payment for their goods or services through use of payment cards. Two locally-run success cases such as MamaMike.com online kiosk and Biashara.biz that have found some good selling to foreigners and Kenyans in the diaspora use international services such as PayPal†, Checkout or Paymate to facilitate transactions.

Many businesses get offshore online accounts

The problems of payment continue to create headaches for online business, and many businesses end up getting online accounts offshore which are rather expensive.

Most third party online merchant, even PayPal, will not issue accounts to a Kenyan address directly, and those who do charge exorbitant fees, making it next to impossible for Kenyans to open offshore merchant accounts.

Sadly, Kenya is not in the geographical jurisdiction of most third party providers. This problem has meant that most Kenyan firms use websites as a purely informational tool.

Although Internet security poses a major concern, analysts argue that transactions are actually less dangerous in cyberspace than in the physical world.

That’s because a great deal of credit card fraud is caused by retail sales employees who handle card numbers. E-Commerce systems remove this temptation by encrypting the numbers on a company’s servers.

Is e-Commerce safe?

For merchants, e-Commerce is actually safer than opening a store that could be looted, burned, or flooded. The challenge is in getting customers to believe that e-Commerce is safe for them.

Consumers don’t really believe it yet, but experts will confirm that e-Commerce transactions are actually safer than ordinary credit card purchases. Every time you pay with a credit card at a store, in a restaurant, or every time you throw away a credit card receipt-you make yourself vulnerable to fraud. Browser makers and credit card companies have security standards e.g. the Secure Electronic Transactions (SET), which encodes the credit card numbers that sit on vendors’ servers so that only banks and credit card companies can read the numbers.

No e-Commerce system can guarantee 100-percent protection for your credit card, but you are less likely to get your pocket picked online than in a real store.

Who stands to lose?

The companies most directly threatened by e-Commerce include travel agencies, entertainment ticket operations, mail-order catalogs, and retail stores-particularly software stores.

E-Commerce has already successfully invaded their territories. And as Bill Gates put it sometime back, “e-Commerce is about to eliminate the middleman”.

Anyone between the seller and the buyer is in big trouble. Some of the world-renowned e-Commerce success stories are Amazon.com and Virtual Vineyards. Amazon.com doesn’t publish books nor does Virtual Vineyards make wine. They are simply online distributors.

So as not to be left behind, Kenya needs to strategically position itself to determine emerging opportunities and utilise the already available human capital and technological skills to make the most of e-Commerce. Time has come for Kenyan businesses to reform their online presence. E-Commerce represents the most exciting business opportunity in decades bringing a unique chance to profitably exploit market conditions, lowered switching costs and the economies of the scale inherent in e-Commerce.

The author is a telecom and ICT strategy analyst

Pauline@nordic.co.ke

Source: The Standard

Comments

comments


19 Responses to E-shopping: Is Kenya ready for business?

  1. rose says:

    it is better for us you may give the status of all countries not only kenya eg rwanda etc

  2. safari says:

    I think two problems that actual E-shopping faces in Kenya is payment system and robust product delivery system.

  3. Joel says:

    We at Onlineduka Co. Ltd are working to change all the above and bring kenya into age by introducing world-class e-commerce services for our clients here in Kenya and the east african region as a whole.

    Kind Regards
    Amenya Joel
    C.E.O
    Onlineduka Co. Ltd

  4. charles says:

    I think the major problem is the payment system, a localised payment system should be developed for this region & also accessibility of the internet & inernet costs but hopefully with the landing of the fibre optic cable most of this will change . Reliable logistics & cost is also a hinderance . looking foward to launching my e-shopping company this year .

  5. Evans says:

    e-commerce is all about free business opportunities all what is required is innovation.
    I would also concur with the statement that local banks need to do something to improve confidence in e-commerce usage .

  6. John says:

    check out http://www.enrakenya.com, they are branding themselves as rachel’s Bargain Corner – i think this is the closest we have gotten to complete online shopping in kenya.
    I bought a book and it was delivered to me in three days. i love this

  7. chore says:

    i think another disadvantage is the attitude we have toward online security and fraud is very common theirs is therefore a need to sensitize people in the country abt the security features of transacting online bt i am confident it will pick up sooner rather than later.

  8. Bett says:

    Indeed,kenya isn’t ready for this outfit,we should all rise up in making Kenya as one of the worlds’ online business destination.

  9. Njau Ndirangu says:

    There is one website thriving transacting purchases online. Check out http://www.sokomarket.com

  10. Danson says:

    Kenya turn to do business over the internet has come.Its OK to take time like she did before getting there.

    I&M bank has opened the door e-commerce in Kenya. JamboPay a localised online payment system is bridging the gap. http://www.businessdailyafrica.com/-/539444/846300/-/t1ratf/-/index.html

  11. wambui says:

    With the fast growth of Mpesa and Mcommerce, hopefully buying and selling will increase via mobile. This will open doors for many especially those in the rural areas.

  12. Musheekoh says:

    A Definite Yes…
    All it will take is for a few guyz who are knowledgable in setting up a website to research widely and launch their thing, and within a short time more people or even businesses and companies wil follow suite.
    It will be difficult in the beginning but the successful ones will form a blueprint to be followed, take an example of The Equity Bank_ who would have ever thought a Locally formed bank would thrive as much as this one??
    I believe it is time to move into the deep waters in terms of Ecommerce and Technology as a whole in Kenya………………

  13. francis says:

    Actually kenya is ready at some grassroots but the internet connection is the major ploblem,online frauds and lack off ict rules from the goverment .

  14. moses says:

    Actually it looks like its gonna take time to be operational in kenya considering poor and unreliable energy with blackouts every moments.

  15. Fred says:

    The technology is there, though we havent trusted it yet.

  16. Leah says:

    Kenyans are slow bloomers, but when they bloom, the growth curve goes straight up in a very short span of time. They’re just being cautious and also the lack of proper and correct info. Once they understand and embrace e-commerce it will be mass hysteria. Just give them a while.

    Does any one know averagely the turnover of these Kenyan online stores in a year is? What is the Largest operating cost they incur? How many people click on these sites on average in a day?

    These sites also need to market themselves more aggressively, not only online but through print, billboard , TV, radio media. ..mpesa,zap etc.

  17. Allan K says:

    I beleive its a matter of time and Kenya will be sailing like the rest of the world in E-commerce. Website such http://www.simbabiz.com is one of the dynamic website that is set to bring about the E-commerce change in Kenya, the wave that people wish to see. I believe in the mean time, people are taking advantage of the local payment gateways such us Mpesa and ZAP. Simbabiz.com also allows you to use paypal that is secure way to pay and allow credit cards. I believe the change is here, all we need to do is embrace it.

  18. vic says:

    About e-commerce in kenya I think 4years from 2day.77% of homes in kenya will have a computer connected to the internet.and with the growth of mobile money transfer things will be easy in the e-commerce sector.am in the process of designing one which will serve E africa.

  19. Mash says:

    Kenyans are doing great in E-commerce and the desire for Internet business is high. Competition is stiff too. A year or 2 down the line Kenya will be far in terms of internet technology. New and attractive websites such as htt://www.dvplaza.co.ke have the changed the face of i-advertising and E-commerce.

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