Top players in Kenya’s Online Businesses (Part 2)
Last week we introduced the two part series of Top players in Kenya’s Online Businesses and differentiated between Online Market Places and E-Commerce. The distinction we made between Online Market Places and E-Commerce is that Online Market Places major on linking buyers to sellers and vice versa. On the contrary, E-Commerce businesses are the sellers themselves using online platforms such as websites to sell directly to the buyers. The first part dealt with the top player’s in the Online Market Places segment where we briefly described players such as N-Soko, Google Trader, Naspers, Ringier, Verse Ltd and One Africa Media among many others. For more information about the top players in Kenya’s Online Market Places, read our first article Top Players in Kenya’s Online Businesses (Part 1).
In this second and last part of the top players in Kenya’s Online Businesses, we are describing the players who have ventured into E-Commerce. Even before we introduce the top players, it is important to realize that Kenyan economic status has not been favorable to E-Commerce for two main reasons:
1. E-Commerce thrives on bulk buying whereby sellers can offer products and services at huge discounts compared to buying the same at physical shops. Compare this to airline tickets that are normally 5% cheaper when bought online. However, products bought by Kenyans in bulk are mainly household items such as Unga, Sugar, Coke, Omo, Cigarettes, Airtime, Petrol, Batteries, Razorblades, Sanitary items, Beer, Toothpaste etc that would rather be unrealistic to offer online. Products that sellers prefer to sell online are things like Massages, Car washes, Cinema tickets, Domestic hotel beds, Airline Tickets, Electronics, Flowers, Cakes, Pizza, etc but these hardly have bulk buyers. Ok there maybe, but are they bulk enough for online sales profitability? If look closely at the two types of products, what Kenyans buy in bulk vs what would sell in bulk, you realize we need to at least have achieved vision 20130 for E-commerce to make economic sense.
2. E- Commerce is a much more complicated business when considering the upstream supply chain (getting the stock) and downstream supply chain (getting the delivery to the customer). Up until now, E-Commerce’s primary constraint in Kenya has been the issue of supply chain and logistics – getting goods through the port, finding high quality suppliers, and managing next day delivery to customers nationally. No-one has quite achieved that yet but a number of major players are entering the market with very heavy capital spending on warehousing and fleets of delivery bodabodas.
The big players who are investing in E-Commerce can be divided into a few broad segments with different business models.
Mass Market E-Commerce – These are sites that carry very large range of inventory. Examples are the (late) Kalahari, but also new entrants like Jumia.co.ke and Konga.co.ke (coming soon).
Niche E-commerce – These sites carry one specific range of products – clothes, homewares and so on. Great Kenyan examples are www.mystrawberrystore.co.ke (IKEA homewares) and www.closet49.co.ke (fashion) and www.cakes.co.ke (cakes).
Diasporan E-Commerce – These are Kenyan sites that allow diasporans to buy local Kenyan products for relatives as a form of money remittance. The best known Kenyan examples are www.mamamikes.com (based in Nairobi) and www.babawatoto.com (based in Dallas)
Services – These do not necessarily have the upstream supply chain but aggregate an audience under a brand and deliver aggregated services. Great examples include www.eatout.co.ke (restaurant bookings), www.hellofood.co.ke (food delivery), www.epepea.com (grocery delivery)
Ticketing, Events & Payments – This is perhaps a whole space by itself, but examples include leading merchant aggregator www.kopokopo.com, online payments and ticketing (www.persapal.com), www.ticketsasa.com, www.254events.com, www.emanamba.com (bus ticket booking), www.travelstart.co.ke
Deals & Discounts– Players in this space are Ringier’s www.rupu.co.ke, and N-Soko’s new deals site. Mocality tried and failed in this space.
Flash Sales & Curated Sales – Flash Sales offer one product up for sales within a limited period of time roughly 24-36 hours at a discount. Curated Sales enabled customers to customize their product(s) collection depending on preference and taste. No-one is doing this yet in Kenya under a brand.
Social Sales – These are essentially curated sales in private Facebook marketplaces in Kenya powered by MPESA for payments and delivery or collection direct with the vendor. I think this is the hottest e-commerce market in Kenya today. There are literally hundreds of very profitable, niche Facebook groups conducting very good e-commerce businesses on the platform. The two that spring to mind are Kilimani Mums – you cannot get into this group as a member of the public unless 1. you are a woman 2. you are invited. But this is the leading seller of baby related products and services in Kenya today. Another very good one is “Nairobi Expat Marketplace” – again invitation only with strict rules of participation. But mainly the thing to watch here on Facebook is clothes sales and fashion – Facebook in my view is the number one fashion selling website in Kenya today; it is revolutionizing the mitumba trade, and hundreds of tiny fashion retailers are selling huge volumes of very good quality fashion imported from the Far East, Dubai and Turkey mainly.
So who are the top players? At the big end of town, Rocket Internet raised $70m for Jumia, and Naspers put a rumored $50m into Konga (we will confirm this rumor and update accordingly). In Nigeria,these sites are very popular, and e-commerce is seriously disrupting the retail industry there. Jumia built a massive warehouse there, and it is believed is constructing a huge warehouse in Embakasi in Nairobi before launching the brand more aggressively here. Konga is also on the way. Check out Jumia’s warehouse in Nigeria picture below from this link http://techloy.com/
The good news about Kenya’s Online Businesses is that big companies like Naspers, Rocket Internet, Verse Ltd, Safaricom, One Africa Media that has over Shs. 1.7 billion for competitive investment, etc, are ready to take both the Online Market Places and E-Commerce to the next level.