High shipping costs is one of the challenges facing e-commerce in Kenya. Learn how to solve this and other factors limiting e-commerce growth in the country.
Kenya has witnessed exceptional growth in internet penetration, which now sees it sitting on top of the tree for mobile money usage.
The popularity of M-Pesa, in particular, has spurred e-commerce growth in Kenya, making the country one of the most eco-commerce-friendly markets in Africa.
But it's not all roses, as Jumia, the biggest e-commerce marketplace in Kenya, has shown. The company has developed an unwanted reputation of quarterly losses, blamed on a failure to manage cash flow and contain costs.
Jumia's struggles highlight some of the many challenges facing e-commerce in Kenya.
E-commerce was touted as the great hope of African economies betting their future on a young, tech-savvy population and expanding internet connectivity.
So is the e-commerce bubble busting before it's even fully inflated?
7 top challenges facing e-commerce in Kenya
When people think of e-commerce in Kenya, they are quick to make comparisons with the likes of Amazon, eBay, Alibaba, and Aliexpress. They think of:
- Free shipping
- Same day delivery
- Free returns
In truth, African online retailers are far from offering these, making such comparisons misguiding. Poor infrastructure, unstable internet connectivity, product quality and payment security concerns, and supply chain challenges mean e-commerce in Kenya is not a bed of roses.
Kenya has made great strides in creating a conducive environment for e-commerce, helped in large part by a vibrant mobile payments infrastructure. Still, the country faces many of the other challenges its peers on the continent face.
1. Turning shoppers into paying customers
Imagine driving hundreds of visitors to your online shop without recording enough sales to keep the business afloat. Unfortunately, that is the perennial struggle of young e-commerce businesses.
Traffic alone does not equal sales. Converting that traffic into paying customers requires work. Most times, the reason visitors on e-commerce websites don't convert has nothing to do with price. It has more to do with the following:
- hard-to-follow navigation,
- poorly optimised product pages,
- complex checkout processes.
If visitors find it hard to navigate your e-commerce website, they will struggle to find the products they are looking for and will leave without buying. The same is true for complicated checkout processes.
If visitors are not converting into paying customers, take a step back and investigate why. Dip into your analytics and learn how people are finding your website.
Are the bulk of your visitors coming from Google? Which searches are bringing them? How many of them are navigating deeper into your website and making purchases? Consider re-optimising your landing pages if the searches bringing people to your site have commercial intent.
Think from a shopper's perspective and imagine the steps they would take when they land on your pages.
Let's suppose you sell shoes. Imagine a shopper landing on the athletic shoes page; adding prominent links to your top-selling trainers for women and men will help them quickly find what they are looking for. Once they get there, make it easy to filter by colour, size, and brand.
2. Customer experience
It costs more to attract new customers than retain new ones. The task is more challenging online, where consumers have more choices of where to shop, and many things are competing for their attention.
Additionally, you have a 60-70 percent better chance of successfully selling to returning customers than first-time shoppers. The problem, though, is that many online sellers struggle to retain customers. So where are they going wrong?
A good customer experience breeds customer loyalty. Customers who are happy with their shopping experience are more likely to return and recommend the store to others.
In Kenya, most people visiting your e-commerce store use mobile phones. Visitors may not be converting because your website and pages aren't optimised for their devices.
Open your Google Analytics and find the pages with low conversion rates. Next, analyse how people interact with those pages. Check and ensure that all the buttons and links are clickable. If possible, reduce the actions that shoppers have to take to check out.
Other ways to enhance customer experience and boost customer retention include:
- sending thank-you emails,
- awarding loyalty points that are redeemable on the next purchase,
- giving thank-you gifts for purchases exceeding a certain amount.
You can also start a referral program that rewards the customers who successfully bring in new paying customers. Making it easy for people to leave reviews also helps you attract new customers and learn what parts of the buying experience current customers are not happy with that you should re-optimise.
3. Price sensitivity
Consumers in Kenya are as price sensitive as their African peers. They make their buying decisions based on price than other factors. The challenge e-commerce entrepreneurs face is communicating the value their products provide.
How you drive your value proposition is critical here. Instead of focusing shoppers' attention on how low your prices are, focus on articulating the value they get at the prices you are selling at.
Shoppers will pay less attention to cheaper alternatives if you educate them on what your product delivers regarding function, utility, time and energy savings, and other factors consumers use to determine value.
If you chase price-driven shoppers with discounts and sales, you will lose them when your competitors drop their prices.
To overcome price sensitivity, you can either shift shoppers' attention away from the price to the value it offers or reposition the product in a new category, making it hard for shoppers to compare it with its cheaper alternatives.
The best tool to use in both instances is the product copy.
Rewrite your product description copy to highlight your product's main features. Even better, translate those features into actual customer benefits, which is what shoppers are interested in.
Your product copy is also crucial when repositioning your product in a new category. This strategy entails educating your target customers on new uses of your product, which expands its utility and helps to justify the price.
Of course, creating a great user experience is a more effective way to deal with price sensitivity. It can remove it altogether.
Provided your product is good and delivers on your marketing promise, you can create fiercely loyal fans out of your customers. These are more than just customers. They are brand advocates who will not even consider looking at another product. The best way to do this is to create a community around your product using social media and email marketing.
4. High shipping costs
Shipping logistics is one of the biggest cost drivers and the reason for higher-than-ideal prices in all of commerce and a significant challenge limiting the growth of e-commerce in Kenya.
High fuel costs and traffic congestion in our cities are a few of the many factors contributing to the high shipping cost. The cost itself is based on many factors, including the item's size, weight, fragility, and the distance involved, which adds to the complexity of the challenge.
Shopping online is convenient as it saves consumers the trip to the mall. The resulting time and fuel savings are big incentives for people to shop online. But shoppers are not willing to overpay for convenience.
You can only absorb the cost of shipping to a degree. So what can you do to reduce your shipping costs?
Although it will require significant investment, you can add more fulfilment centres to reduce the distance you have to transport orders. Instead of transporting items across the country, strategically adding fulfilment centres in areas your customers are concentrated will cut your shipping costs.
Consider using sustainable yet cheaper packaging materials. While that may reduce the unboxing experience of your product, you can also reduce costs by reducing the amount of wrapping you use when packaging items for shipping.
Still on the cost of packaging, consider using poly bags and mailer envelopes over fancier but costlier boxes. The savings may seem small, but they will add up with more orders you ship.
If you have chosen to pass the shipping cost to customers, you would be better off increasing the product's price than adding the shipping charge at checkout. You can then offer free shipping as a benefit. A higher price is less noticeable than a separate shipping cost.
5. Product return and refund policies
Imagine operating in an environment where shipping costs are high and then having to deal with the double-edged sword that is product returns and refunds. Many e-commerce businesses simply can't afford to offer free return shipping.
The best way to reduce product returns and refunds is to prevent them. There are a few ways you can do this. One of them is to provide more detailed product descriptions to remove the reasons people often cite for returning products they buy online.
A common reason for product returns is that the shipped product is smaller than they thought. To prevent this, ensure your product descriptions are detailed, complete with all their dimensions, materials, and colour information.
As well as ensuring your product descriptions are detailed, minimising packing errors where you ship the wrong items will also help prevent returns.
6. Primacy of cash as a means of payment
The growth of e-commerce and mobile money is helping Kenya's push towards a cashless society. However, a contrarian view is that consumers' attachment to cash is hampering the growth of e-commerce.
Despite the improved safety and convenience of online payments, many consumers still prefer to pay cash for their e-commerce purchases. But, of course, it may have less to do with a preference for paying cash than wanting to see and be satisfied with what's been shipped before paying.
And therein lies the challenge with cash-on-delivery for e-commerce businesses. COD, whether hard cash, plastic cash, or mobile money, makes it easier for buyers to return ordered items.
The effect of cash-on-delivery purchases in e-commerce is that you can't mark shipped orders as sales because the customer still needs to pay and may still decide not to, which is no way to run a business.
We have advised providing more detailed product descriptions to reduce product returns. When customers have all the information they need to make the right purchase, they are less likely to insist on paying cash on delivery.
Of course, cash-on-delivery may be the only convenient payment option you have provided for shoppers:
7. Limited payment options
If you don't have M-Pesa as a payment method on your e-commerce website in Kenya, you are setting yourself up for failure. Generally, you will boost your chances of successful checkouts if you give your customers more payment options, but adding M-Pesa more than increases your chances.
Mobile money, particularly M-Pesa, is Kenya's most popular method for paying for things online. If you serve international clients, you must also add Visa as Mastercard.
Which payment methods you provide on your checkout pages depends on the payment gateway you use. Besides the options a payment gateway offers, they must also be reliable. If your payment gateway is frequently down, you will miss out on sales and disappoint customers.
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