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Mobile Commerce Revolution

26th Jun, 2019

Kenyan youth catch the internet start-up bug

Ian Arunga is a man who wears many hats. He describes himself as a writer, a creative director, a blogger and also the founder of Dapper Monkey, an online clothing store. Dapper Monkey is the one stop shop for what he refers to as ‘the dapper man’, or to put it simply, the classic man. “We target the man who likes well-fitting clothes. The man who is unafraid of colours and likes good suits and good shoes,” he told Venture. “We target the man who wants to be different.” Since its formation, Dapper Monkey has seen some phenomenal growth both in sales and profits in the two years it has been in existence. Dapper Monkey is just one of the companies jostling for online buyers in the country’s fast growing online retail space. “My partner and I invested around KES1 million in the business and three months after our launch, the business broke even,” he says. The Dapper Monkey story is not entirely different from others exploiting this online space. Purpink, an online gift store, is also following the same trajectory, recording impressive sales and client numbers since its entry into online business four years ago.

 

“We started out with a capital of KES500 while in university,” Ayrton Bett, Purpink’s co-founder says. “In a few weeks we’d grown this to KES4, 000 in profits.” The internet market, which forms the backbone of the success of these two companies, has been greatly transformed over the years by a combination of the roll out of Universal Service Fund (USF) projects, increased investment in network upgrades by service providers such as Safaricom, Telkom as well as Jamii Telecommunications Limited. This, coupled with the increased availability, affordability of smartphones and data bundles has helped shape the e-commerce narrative in the country. The Communication Authority of Kenya, which regulates the communications sector, says broadband subscriptions continue to grow. “The number of broadband subscriptions rose by 3 percent to 20.5 million from 19.9 million recorded in the third quarter of 2017. When compared to the same period in the previous year, a growth of 33.1 per cent was witnessed,” the Authority says in its 2017/2018 Sector Report. The CA attributes this growth to increased roll out of 4G network and expansion of last mile fibre network coupled with increased demand for broadband services. “Subsequently, broadband penetration stood at 43.9 per 100 inhabitants as the end of June, 2018,” reads the report. But, although Dapper Monkey and Purpink are recording victories in terms of revenue growth and profitability, observers say the e-commerce market and its potential remains generally unexploited, and that many of those who are in this space are going about it the wrong way. “Some businesses have been fairly successful but most of the pioneers had wrong business models,” Dr. Bitange Ndemo, former Permanent Secretary in the ministry of Information Communication and Technology and the architect of the internet revolution in Kenya says.

 

A rookie mistake for many startups, Ndemo says, is the lack of market research and keeping of unnecessarily large inventory. “For instance, Alibaba ,which is one of the world’s biggest e-commerce platforms, has no inventory,” he says. Admittedly though, some of the challenges start-ups in this space face are as a result of what he terms as ‘institutional oversights.’ “In many parts of the world, it is the government’s duty to set up infrastructure that would lead to better exploitation of e-commerce. Now, many companies are dedicating resources to come up with basic infrastructure such as GPS tagging and mapping,” Ndemo says. And the setting up of this basic infrastructure might just be the silver bullet that these growing enterprises need to transition from being startups to profitable SMEs. “A key factor that will impact the growth of e-commerce in Kenya and the region as a whole will be transport (i.e. delivery ) logistics and retailers’ ability to gain the trust of consumers that may still be hesitant to shop online,”  Thomas Verryn, Euromonitor Senior Research Manager, told Venture. Euromonitor is an international market research provider. However, even with these challenges, players continue to, in their own way, disrupt the retail space. At 24 years of age, Susan Mweni says her company, Sued Watches, is ready to claim a stake in this rapidly growing, cut throat industry. “Being online has helped me sell to customers I couldn’t otherwise get to. My products can now be reduced to a hashtag that will reach millions of people as opposed to having a shop that will be limited to just a few eyeballs,” Mweni says. Her company sells customised Afrocentric watches. She says she sells around 50 to 60 watches a month averaging around two watches every day. For Mweni, Arunga and Bett, success for their individual brands translates into success for other local businesses as well.

 

A majority of products on their platforms are sourced locally. “In the beginning, we used to get our stock from England, China, the US and some parts of Europe. Now most of our stock is sourced locally,” Arunga says. Local businesses Bett, of Purpink, too is on a journey to incorporate local creatives into his gifts platform. “We realised that there are many people and companies out there who make amazing products but do not have a platform to sell them. We are trying to have as many local products on our website as possible,” Bett says. Over the last five years, online retail in Kenya has grown by more than 10 per cent. Euromonitor estimates that there will be further growth over the coming years. “Euromonitor estimates that Internet retailing earned KES8 million in 2017 excluding VAT and will grow by about 12% until 2022 to reach KES10.941 million in 2022, excluding VAT,” Verryn says, adding that the Kenyan retail sector is the second most developed in… (READ MORE)

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