Time is ripe to thrive in e-commerce

There is a silent revolution under way in Kenya. It is demand driven by the ever widening consumer class population.

Government’s efforts to expand infrastructure; electricity, roads, rails and telecommunication are progressively having an impact on the cost of doing business. Transaction costs are falling and opportunities for business to scale up are expanding.

The emerging retail opportunities are challenging to exploit as traditional retail centres in Kenya are a number of years past their prime, few and far between.

The sheer demand for retail space is so large that retailers are faced with landlord demand for goodwill, raising operating costs. This curse has now infected even the newest gleaming centres that dot middle-class neighbourhoods of our towns.

Additionally, logistical chains are underdeveloped simply because our economy is literally in the early stages of emerging.

Warehousing centres do not exist although trucking businesses have come of age. This will change thanks to the considerable investments in our road network.

Nevertheless, for now, most retailers with ambitions to roll out a national network have to build their own logistical solutions, further raising capital costs.

These constraints do seem well suited to an online made-to-order retailing business. Access to the Internet has been broadened, thanks to cellphone companies and the mobile payment solutions that they offer.

Already media companies are reporting sharp growth in online advertising and Kenyan entities pointing to the growing awareness of commercial opportunity in the online world.

Business in Kenya should seriously re-think their business models and seek out viable ways that they can engage and address customers via electronic commerce platforms.

Today’s traffic jams are a huge disincentive for the shopper who has to walk from place to place and for many businesses multiple locations may not be ideal as at each location the outlet may not have enough customers to cover that outlet’s fixed costs. This customer concentration issue is a real limitation for businesses.

Already many young entrepreneurs are using what in a retailing sense are basic tools to grow their nascent businesses. These social platforms such a Twitter, Facebook, Whatsapp et al are proving to be powerful in generating endorsements and new orders.

However, integration with payment solutions is incomplete and exposes these businesses to credit and default risks. Clearly more competition is required in this area to improve the commercial prospects.

Then there is the delivery completion of each order that needs to be better organised.

Possibly the new county governments can get involved in naming streets and developing a physical addressing system. Some private entities are years ahead on this score and today offer electronic maps that are surprisingly accurate.

From a public good point of view, it would be better that we ensure an open system does emerge avoid a monopoly situation that a single private entity creates.

Looking at all this, it is clear that all the individual building blocks for an electronic retailing culture are in place. Young literate urban dwellers are doing the best they can.

The time has now come for the larger businesses to enter the fray and speed up the adoption. Businesses need only look elsewhere around the world and acknowledge that this is a viable way to grow revenue and profits.

Government, with entities like the revenue authority, universities and others are starting to deploy services onto the net and in a sense doing its bit to deepen adoption.

This article first appeared on Business Daily Africa


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