Kenya: Entrepreneurs spot gap to give small businesses access to the online economy
Despite Kenya’s relatively widespread internet penetration and high adoption of tech-enabled services, many small shopkeepers are not taking full advantage of the online economy. Reasons why their e-commerce sales are lagging include tied-up inventory and cash-flow concerns associated with some existing marketplaces; expensive and inefficient delivery services; digital payment infrastructure hurdles; and a lack of skills and capital to build online storefronts.
A few years back, a group of entrepreneurs came together with the aim to build a solution to these problems. Sky.Garden is a platform that allows Kenyan businesses to create their own online shops. It takes care of payments and plugs in with local delivery companies … a type of Shopify for Africa. Now a shoemaker at one end of Kenya can sell shoes to a customer at the other end without being trained in technology. The item will be delivered within 24 hours, and the money will be paid to the shoe seller’s account when the customer accepts the item. Sky.Garden also has its own marketplace, where it showcases the products of the merchants using its platform.
To find out more, How we made it in Africa’s Kageni Muse spoke to Sky.Garden co-founder and CEO Martin Majlund. Below are slightly edited excerpts from the conversation.
1. Tell us how you started Sky.Garden.
The idea started in 2015 with my Danish co-founder Christian Grubak. I was the head of marketing technology at brewing company Carlsberg globally and was travelling extensively to identify digital trends I could bring back to the group and scale across our 160 markets. I was inspired by the incredible growth we saw in Southeast Asia and China, especially as a result of digital technologies. Of interest was Alibaba, created in China back in 1999; interestingly, it accelerated after the SARS pandemic in 2003.
I had been a corporate soldier for some years and wanted to do something meaningful for more people and had the idea to take some of the experience and knowledge we gleaned from Denmark to build a technology-based business for sub-Saharan African markets. We came up with this concept of providing a tool to small businesses that need access to the online economy. We wanted to remove their struggles with cash flow, inventory and the distribution of products.
By pure coincidence, we met Daniel Maison, who was within the tech ecosystem in Kenya and decided to take the concept forward. In April 2016, we set up the Kenyan company.
2. Why did you choose Kenya, specifically?
We identified where it would be easy to access talent; where there were other tech-enabled corporations and where investments were already flowing. We were pretty inspired by the innovation and tech environment we witnessed in Kenya.
Nigeria is attracting big investments and it is a big market but a tough one. However, all the advice we received was that Nigeria is a mouthful and we should not go there underfunded.
3. How is Sky.Garden different from existing e-commerce platforms?
After we incorporated our company in Kenya, we spent almost a year identifying market problems. We visited businesses in Nairobi’s central business district and identified their pain points in selling via existing e-commerce marketplaces. Their biggest issue was cash flow. They had to send their products to the marketplaces’ warehouses but weren’t paid until they made a sale. So, they did not have access to their inventory or capital. When they sold something, they would have to wait two to four weeks for accounts to get reconciled.
Getting reach was another problem. Sales on the traditional e-commerce platforms were solely dependent on online traffic to the marketplace. Small vendors did not have any control over what kind of awareness their products got. It was not a place for small guys who do not have the muscle to pay for advertising. Yet, a lot of these guys are digitally savvy; they have access to their customers on WhatsApp and can receive digital payments through the Kenyan mobile money platform M-Pesa. Their issue was how to connect sales with their existing customers in a secure way.
This was the mindset with which we started Sky.Garden. We wanted to help vendors onboard their products, sell to their existing customers and Sky.Garden would take care of delivery and payments. Customers know they do not have to pay unless they receive the right product and the sellers know the second the customer accepts the product, they would receive payment. We are giving autonomy to individual sellers, letting them do what they are best at – selling – and giving them the growth tools and technology to support their businesses.
A seller can sign up on Sky.Garden within minutes and create a web shop with a storefront, upload their products, set prices, create a campaign, add customers and start marketing products to these customers. The individual seller has the ability to push products to their customers on their web shop. They can also add their products to the Sky.Garden marketplace, the platform we control.
We have a virtual wallet for each merchant where all the revenue goes. The merchant can use the money on our platform, for example, to pay for advertising or they can transfer it to M-Pesa or a bank account.
4. What are the costs associated with selling on your platform?
It’s free for a seller to get on board. It will not cost anything unless they sell something. We add an 8% commission on top of the sale price.
We dynamically calculate the shipping price depending on the distance between seller and buyer, and what kind of product is being delivered. The shipping price is added to the basket value so the consumer can see how much they are paying for shipping. Most of our sales are paid for through mobile money but we also have credit cards and different lending options where customers can, in real time, apply for a loan, buy a product and pay later. We have partners who undertake this.
5. Trust remains an issue for Kenya’s online retail industry. How does Sky.Garden overcome this challenge?
We have built a behavioral algorithm into our platform that tracks all deviations from what an ideal sale should look like. The better the seller – they don’t leave delivery drivers waiting, don’t sell wrong things – the more bonus points and higher visibility they get on our marketplace. If the seller does something the system doesn’t like, they are penalised: points are deducted, a warning is issued and this means lower visibility. If this is done multiple times, sellers are banned from the platform.
6. Describe the company’s growth so far.
We had our first transaction in 2017 and have been growing steadily since then. We have onboarded more than 20,000 vendors but the active ones stand at about 7,000.
Building a brand requires capital. In 2018, we had our seed round where we raised $1.2 million, which we used to start building our brand and we saw quite a lot of growth in 2018 and 2019. In June 2021, we closed a $4 million round of series A funding, which will be used to make us more than just the new kid on the block.
7. Where are the biggest opportunities for e-commerce in Africa?
A huge part of the economy on the continent is driven by the informal market; almost everyone has a side hustle. How do we support the side hustle? How can technology help people become better entrepreneurs? This is where the opportunity lies.
Right now, we are focusing on Kenya as there is a lot of opportunity in the country. In the medium term, we are looking to take the platform into other East African countries. West Africa is also of interest.
Sky.Garden CEO Martin Majlund’s contact information
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Company name: Sky.Garden
Contact person: Martin Majlund
Email address: [email protected]