E-commerce startups change tack in the battle for shoppers

Electronic Commerce (e-commerce) is a marketplace for the busy tech-savvy middle-class individual who dreads a trip to supermarkets where they spend hours tediously walking around shelves trying to locate the products they need.

These individuals, mostly in urban areas, can order whatever they need by a tap on their smartphones from home or office. For them, the convenience of online shopping compensates for any extra expenses such as transport, which they may incur.

But high inflationary pressure is changing all this, with every Kenyan shopping for deals to navigate the high cost of living. At first, it looks like the digital marketplace would be the last place these individuals would visit for better deals on non-perishable food products such as maize flour, wheat flour and rice.

But the new online marketplaces are building platforms to help consumers save on their shrinking disposable income rather than just help them with convenience. The survival instinct has kicked in even for the middle class notorious for their profligacy.

Kapu, an e-commerce start-up, is one of the companies that would like to lure Kenyan shoppers from the supermarkets, mama mbogas and kiosks to their platform by offering them food products at lower prices.

“It (Kapu) is a combination of us being a low-cost model, working directly with suppliers and because we get promotions from manufacturers, we can pass on all the way to consumers,” said Sam Chapatte, the chief executive officer of Kapu.

Kapu was started in January last year by former top executives of Jumia, an African e-commerce giant that is listed on the New York Stock Exchange (NYSE). It mostly targets Wanjiku by selling food items online, especially grocery items.

The goal is to help consumers save up to 10 percent on food when they shop on the digital marketplace.

The founders of Kapu say they have deliberately adopted a low-cost model, thus making goods sold on the platform cheap.

“We are not trying to deliver in 30 minutes. Because doing that is expensive. So, if you are a customer that values convenience, Kapu is not what you should be going for,” explained Mr Chapatte.

For other e-commerce firms, the value is convenience. For example, you could order Pizza (a quintessential middle-class snack) from Jumia Food or Glovo and get it in 30 minutes.

Not at Kapu, where the delivery is made the next day, and even then you need to walk to the nearest pickup station to get it.

Copia, which was founded in 2013 by Silicon Valley veterans Tracey Turner and Jonathan Lewis, says through strategic partnerships and bulk purchasing, it has been able to negotiate for favourable deals which then allows them to offer products at competitive prices.

“By doing this, we reduce costs and pass those savings on to our customers,” says Tim Steel, CEO of Copia Global.

“Additionally, embracing technology to streamline operations in our Supply Chain has also played a crucial role in minimizing overhead costs, contributing to overall affordability,” added Steel.

Mr Steel says that although they are keen to ensure that affordability does not come at the expense of convenience, their primary focus is on the mass market, including those in underserved rural areas who do not have access to a wide range of essential goods.

The statement that e-commerce companies can help bring down the cost of living sounds like an overstatement.

Consumer prices for several products have been pushed up by various macroeconomic factors such as expensive loans, devaluation of the shilling, drought and supply chain constraints due to such global shocks as Covid-19 and the war in Ukraine.

These problems cannot be addressed at the firm level.

"Because they (e-commerce companies) are going directly to consumers they are actually eliminating a lot of costs in the value chain," said Eugene Too, head of sales at Unga Limited.

Unga, which owns brands such as Jogoo maize meal, says it has partnered with several e-commerce companies in Kenya.

"You can imagine if you are asking for my product and it goes through the normal value chain of distributor and wholesalers and everybody is putting on their mark up," added Too.

Keval Shah, the chief commercial officer in charge of modern and general trade at Chandaria Industries, says their collaboration with e-commerce companies involves implementing innovative solutions to streamline their operations.

This includes optimising inventory management, enhancing logistical efficiency, and leveraging data analytics to make informed decisions.

"By adopting these strategies and not having physical stores, e-commerce partners can reduce operating costs, which allows them to offer more competitive prices to consumers," said Shah.

"Additionally, our continuous efforts to drive technological advancements and negotiate favourable terms with suppliers contribute to creating a cost-effective environment for all our partners," said Shah.

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