Describes what a company needs to know to take advantage of e-commerce in the local market and covers prominent B2B websites.
Kenya’s adoption of E-Commerce continues to grow. According to Statista, user penetration is above the regional average, with revenues expected to have a positive annual average growth of 16.4% by 2025. With revenue of US$1.1 billion and a share of 76.1%, eCommerce generated the highest digital revenues in 2020 (Statista).
More broadly, there are several factors that fuel e-commerce growth in Kenya. Kenya recently adopted a digital economy blueprint meant to further develop the ICT sector and e-commerce activity. UNCTAD estimates the proportion of Kenyans aged 15 and above with a financial, (mobile or bank) account which enables them to transact online was second only to Mauritius, particularly because of the high usage of the mobile money system of M-Pesa.
According to BMI, consumer demand for e-commerce is increasing rapidly and will be accelerated by consumers using the service to limit their exposure to crowded stores, given the COVID-19 pandemic. The government’s ambition for universal 4G coverage alongside accelerated smartphone ownership further places Kenya as one of the fastest growing e-commerce markets.
Assessment of Current Buyer Behavior in Market
Consumers in Kenya spend most in the area of Food and non – alcoholic beverages (53.7% of average consumer spending per capita of private households. Digital Expenditures as a share of consumer spending per capita was 1.8%. E-commerce revenues were primarily drawn from Toys and hobby, Furniture and appliances, Food and Personal Care, Electronics and Media as well as Fashion (Statista 2021 Kenya Country Report).
Effects of Covid-19 and its mitigation efforts caused consumer confidence to shrink and triggered lifestyle and daily routine changes among consumers, causing changes in shopping habits among consumers as uncertainty led to a contraction in discretionary spending while purchases of necessities rose. At the same time, households opted for bulk-buying and stockpiling of essentials.
Local eCommerce Sales Rules & Regulations
The Kenya Communications (Amendment) Act of 2008 is Kenya’s adoption of the United Nation’s Model Law on Electronic Commerce of 1996. The highlights of the law include promotion of e-government and e-commerce by increasing public confidence in electronic transactions; legal recognition of electronic records and electronic (digital) signatures; imposition of new offenses with respect to cybercrimes involving electronic records and transactions and the use of computing and telecommunications equipment; and clarification of legal uncertainties about the admissibility of electronic records as evidence in court proceedings.
Online trade platforms in Kenya have traditionally not been regulated under the Kenya Information and Communications Act (KICA) as they do not constitute electronic services as envisaged under the act and are therefore not licensable. This means consumers cannot enjoy protection under the Consumer Protection Regulations (2010) which apply in instances where the Authority’s licensees offer services.
The regulatory environment is changing. On June 30, 2020, President Kenyatta assented to the Finance Act 2020, which included the introduction of a Digital Service Tax (see section on Leading Sectors, Information Communication and Technology).
Additional challenges for companies interested in e-commerce include Logistics and infrastructure, physical addressing, cost of technology, as well as cybersecurity. Currently, many African countries, including Kenya, have very poor fraud detection and prevention mechanisms. In many cases, this makes it difficult to build trust within African online marketplaces, resulting in a delay in e-commerce adoption.
Local eCommerce Business Service Provider Ecosystem:
Kenya ranked number 88th in fastest growing e-commerce economies worldwide according to the 2020 UNCTAD B2C Commerce Index and ranked 4th in Sub Saharan Africa. Pursuant to CAP 411A of the laws of Kenya, the Communications Authority is the primary government agency mandated with e-Commerce industry development in Kenya.
The growth of e-commerce is highlighted by the number and size of new players in the market. Kenya’s largest Telco, Safaricom launched “Masoko,” an e-commerce platform, joining other dominant players in the market such as NYSE listed Jumia, Jiji, Glovo, and U.S-affiliated Copia which provides e-commerce solutions for low-income consumers. Growth in hospitality has also led to the entry of platforms such as UBER Eats. The growth in e-commerce has been further fueled by strong growth in social media adoption as well as increased diversification of marketing channels. According to Data Report (2022), “Digital 2022 Global Digital Overview,” there were 11.75 million social media users in Kenya in January 2022. The number of social media users in Kenya increased by 750,000 (+6.8%) between 2021 and 2022.
The number of social media users in Kenya was equivalent to 21.1% of the total population in January 2022.