What Kenyan e-commerce firms can learn from the Chinese experience

According to Wenhao Zhang, Kenyan e-commerce platforms, such as Jumia, can learn from the experiences of their Chinese counterparts.

With the advent of economic globalisation and the information age, e-commerce has been developing rapidly and has great prospects. Kenya is one of a few African countries that quickly embraced the trend. According to the Communications Authority of Kenya, the country of 49 million people had 30.8 million internet/data subscriptions by September 2017. Many e-commerce brands have opened shop in the market, including: Jumia, OLX, Kilimall and Cheki, among others.

Today, Kenya’s e-commerce scene can be viewed as similar to that of China in the early 2000s. Since the turn of the millennium, China’s online retail industry has seen exceptional growth, despite domestic consumption and income levels only increasing gradually. By mid-2017, the number of Chinese internet shoppers reached 514 million, according to People’s Daily.

The miracle Chinese e-commerce companies had achieved cannot be separated from their indigenously-developed market strategy, which may be worthwhile for the Kenyan online retail sector to learn from.

Move more retailers online

A glance at Kenyan e-commerce platforms will reveal that many reputable operators have mostly attracted only well-known brands and large retailers, which are often charged a cash deposit to list their products. Admittedly, these platforms pay great attention to the quality of the products listed and the reputation of the platform itself. But high admittance thresholds make it more difficult for retailers to start selling on these platforms.

In 2003, when Taobao, a subsidiary of Alibaba and the largest e-commerce platform in China, started its business, sellers didn’t have to pay any deposit to open their online shops on the Taobao platform. In addition, any individual on Taobao could sell new products, not only second-hand goods as was mostly traded on similar platforms in the West. This policy greatly reduced the threshold for any company or individual to be part of the platform. Hence, in 2005, Taobao defeated Ebay China in just two years as the latter failed to target the millions who previously did not have funds to open a physical store.

Taobao is stringent to maintain the quality of listings. The market competition inside the platform also push merchants to pursue the best quality and service. Taobao’s low-threshold launch strategy illustrates that e-commerce companies should implement the necessary measures to reach a critical mass of buyers and sellers.

Facilitate buyer-seller communication

Kenyan e-commerce webpages often display insufficient information concerning the products and customer reviews. This may be due to small volumes of deals, or a lack of attention by the platforms to encourage customers to review the products.

In China, online sellers put considerable attention on the smooth communication with potential buyers. E-commerce platforms have developed a variety of built-in communication tools allowing merchants to address any question raised by potential buyers in a timely manner. Take the example of TradeManager, a communication tool developed by Alibaba for many of its e-commerce properties. With TradeManager it is possible to chat with buyers and suppliers in real time; search for buyers and suppliers; and get the latest trade alerts. A potential buyer can communicate with the seller via TradeManager on pre-sales questions and post-sales complaints and product returns.

In a market like Kenya, where customers lack basic trust of product images, descriptions and reviews, developing instant messaging software allowing real-time conversation between sellers and buyers will provide a sense of security to the customers, especially when their buying experience becomes unpleasant. The online chat history can also be used by the e-commerce platform to mediate and resolve disputes.

Try to reduce prices

China’s indigenous group-buying sites have gained significant popularity due to the country’s large population and the exponential growth of internet users over the last five years. These platforms typically favour small-margin, high-volume business models, and merchants are inclined to respond to an e-commerce platform’s call for reduction of prices in return for market exposure. With the launch of Meituan in March 2010, hundreds of group-buying websites – led by Dazhongdianping, Nuomi and Juhuasuan – greatly stirred the market, providing highly-discounted products.

As of 2015, Kenyan households spent over 45% of their income on food, with only about 5% of expenditure going to clothing. Online shopping could offer a good alternative to price-sensitive consumers. However, group buying requires a critical mass of internet users to embrace online shopping. Even if all of the internet users in Kenya start shopping on the internet, the market is still ten times smaller than that of China.

Nevertheless, Kenyan e-commerce platforms could make an effort to market competitively-priced products. Virtual shops that are operated only on the internet can save a great amount of overhead costs compared to physical stores, thus gaining a good pricing advantage.

Will Chinese e-commerce successes come to Kenya?

The booming e-commerce market environment in Kenya (and other leading Africa economies) will inevitably meet with the expansion of Chinese e-commerce pioneers. Alibaba’s subsidiary companies, such as Alipay and Alitrip (rebranded to Fliggy), have already followed the growing number of Chinese tourists to Africa, although their services are constrained to the Chinese-speaking community. But soon they will start targeting the local market. Kenya Airways, for instance, has already attempted to accept Alipay as means of payment.

As Jack Ma (chairman of Alibaba Group) mentioned during a speech at Nairobi University in July 2017, the crucial factor for Alibaba’s development in Kenya is finding a suitable partner. When Alibaba enters Kenya in the future, the company will be a Kenyan enterprise with Chinese financial support. This will open a new chapter in the country’s relationship with China. Access to the Chinese e-commerce industry will undoubtedly promote the development and improvement of Kenyan e-commerce companies.

Wenhao Zhang is a MuseEducation Research Fellow. He is currently a young scholar at the Shaanxi Normal University with a focus on electronic business. Wenhao is interested in e-commerce development, as well as China’s business presence overseas, with a focus on developing nations.