africa-online-shopping
Business Management

East Africa: A Shift from Store to Web Business

The shift from the traditional in-store business to online marketplace has been especially fast and profitable in East Africa. This is thanks to the increased penetration of the internet. And the fact that many small-scale businesses and retail shops have been at the forefront of change, albeit with notable bottlenecks and impediments.

As has been noted by Howard Schultz, Starbucks’ CEO, Chair and President about the same scenario in the USA, offline businesses are finding it increasingly difficult to survive without incorporating the internet. He posited that “No longer are many retailers only required to compete with stores on the other side of the street; they are now required to compete with stores on the other side of the country.” This also fits with the East African situation as shoppers are increasingly stepping over national boundaries to shop wherever they wish. 

7.2% of Online Africans Based in Kenya

With the increased use and penetration of internet technology and the popularity of online shopping, individuals with a new retail business idea in East Africa do not necessarily need to open a business storefront. This does not however mean that there is no longer a need for new traditional storefronts, or that all new business ideas work best online. It only means that business people need to assess and consider the product that they want to offer to their customers and the best way to offer this. It is therefore important to understand the business context within the region.

The East African Community (EAC) region originally had Kenya, Tanzania and Uganda. Today, the EAC also includes Rwanda, Burundi and possibly the newest country in the world- South Sudan.

According to the latest statistics on the internet usage and penetration in the EAC region, this area constitutes slightly more than 14% of all users of the internet on the continent of Africa. Burundi has an estimated population of 10 million, 1.7% of which use the internet. This is followed by Rwanda with a population of about 11 million, 7.0% of which have access to the internet. 13% of Uganda’s 33 million have access to the internet, while 12% of Tanzania’s 46 million use the internet.

Not surprisingly, Kenya is the leading user of the internet according to the statistics. Out of the estimated 43 million population, 28.1% Kenyans have access to the internet. This forms a huge chunk of those that have access to the internet on the continent. In fact Kenyans make up 7.2% of the continent’s internet access with the country coming in fourth after Nigeria, Egypt and Morocco.

Women, Credit Cards, Blogs & Mobile Growth

According to the latest survey by MasterCard, Kenyans prefer online shopping. The MasterCard Vice President and Marketing Manager for East Africa and Indian Ocean Islands, Charlton Goredema, added: “Online shopping is one shopping option that can help Kenyans to lessen their dependency on cash payments.”

The survey also noted that most shopping items are cheaper online and that the majority of things purchased were music downloads, computer and mobile software, CDs DVDs, and other digital content.  MasterCard itself, sits at the forefront of promoting cashless shopping both the world generally and in East Africa particularly.

There are many reasons why the region is experiencing a thriving online business environment. But according to the Executive Director of Uganda’s Gudie Leisure Farm, Gudula Naiga Basaza, Information and Communication Technology is the most important reason that the region is moving in the direction of online shopping and business activities.

Speaking in Dar Es Salaam at the AGM of Eastern Africa Women Entrepreneurs Exchange Network, the Director posited that “there is a need for women entrepreneurs to use ICT so that they can fully exploit available opportunities within the East African Community, Comesa, SADC and other regions.”

She also singled out the creation of virtual shops through personal and company websites as serious ways in which women and the region in general can benefit from the technology. This is informed by the fact that 80% of all business transacted in the EAC region are done by women.

Noting that the majority of these women do not have email, let alone websites; the use of social media sites like Twitter and Facebook has contributed immensely to the appreciation of the internet and the adoption of the same to business activities. The use of free blogs have also been cited as very crucial in publicizing and popularizing business websites.

Mobile technology has gained powerful acceptance and adoption in East Africa. This has contributed to the increased access to the internet. And today, the region features powerful mobile internet service providers, which means more people are able to shop online.

The Middle-Class to Hit 1.1 Billion by 2060

Africa’s middle class has tripled over the last 30 years, and Deloitte (pdf) suggests that this will grow to 1.1 billion in 2060. This rising middle-class is promoting a consumerism trend in the region that includes more and more products that were previously inaccessible.

EAC consumerism trends have recently been associated with products that have roots in the east rather than the west. As has been noted by Harry G. Broadman of Albright Stonebridge Group, the recent striking increase of trade and direct investment by firms from Asia (largely China and India) in Sub-Saharan Africa has become a big source of economic discussion.

China has been on the forefront of this by constructing roads, bridges, real estate and other important infrastructure. Although India is the leading Asian trade partner in the EAC and according to the Kenya National Economic Survey 2013, exported $240 million worth of products to Kenya last year.

The ever-improving infrastructure, increased numbers of middle-class consumers and steady rise in technology usage means EAC is fast moving away from the traditional in-store, to the modern online business environment. More and more business transactions are being done online without cash. And as small, medium and large-scale businesses are gradually taking their goods into the online arena, they are leaving more conservatives organizations to languish in the ever-expensive offline field.

 

Daniel Muraga is an experienced online writer and a communications professional based in Kenya

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Daniel Muraga

Daniel Muraga is an experienced online writer and communications professional based in Kenya.

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