Huge tech opportunities Kenyan retailers can tap

Consumers become emboldened to ask for what truly meets their needs. PHOTO | SHUTTERSTOCK

A recent report by audit firm Deloitte surveyed 50 senior executives from leading retail outlets across the globe and asked them about their predictions for the industry in the next 12 months.

At the time, the world was still reeling from the disruptive effects of Covid-19 that had wreaked unimaginable havoc on global supply chains and labour markets, precipitating a historic global inflation and possibly recessions in some leading economies.

When the survey results were out, the executives were optimistic and assumed that the continued rollout of mass vaccination efforts and the lifting of health and movement restrictions could see consumers spend higher in 2022.

Retailers hoped that the aggressive adoption of online shopping during the pandemic would further drive a reset of the global industry and in the medium term revive fortunes to pre-pandemic highs.

However, even as the festive season hits its peak there is little indication that the retail industry has reported improvements in fortunes in line with those projected by the Deloitte survey.

In its latest country risk update for Kenya, Fitch Solutions forecasts a slowdown in GDP growth to 5.2 percent in the second quarter of 2022/2023 compared to 7.5 per cent last year. Despite a slight acceleration in growth expected next year, Fitch states the high cost of goods is expected to depress consumer activity into 2023.

With the country’s inflation at an all-time high of 9.5 per cent, consumers who have contended with tighter household budgets throughout this year are expected to spend less during this festive season.

This means that retail stores and supermarkets could find it harder than expected to find takers for the numerous promotions and marketing campaigns that traditionally meant bumper sales this time of year.

One major failing on the part of players in Kenya’s domestic retail sector is the lethargic adoption of technology in the operation and management of their daily enterprises.

This is despite the massive opportunity that exists in embedding elements of big data analytics, machine learning and artificial intelligence throughout the dynamic sector.

The vast majority of retail stores in Kenya do not have a functional smartphone App for their shoppers and the few that do leave much to be desired in terms of functionality, user interface and variety.

Another underutilised resource for retailers is the loyalty programme. Loyalty programmes offer retailers a wealth of consumer data that can be mined to improve their shopping experience and aid in inventory management among other things.

Retail stores have been at the frontline of the disruption from the gig economy in recent years and are increasingly finding it difficult to keep up with well-resourced e-commerce platforms that are backed with vast treasure troves of consumer data.

The rise in e-commerce, either through platforms like Amazon or stores selling through social media sites like Instagram, has reconfigured the shopping experience for discerning consumers and traditional retailers seem yet to get the message.

Retail stores are further finding it difficult to compete in the labour market primarily because the cost of recruiting and maintaining a full-time staff is relatively higher than that in the sub-contracting model adopted by platforms like Amazon that drive the gig economy.

This has led to high levels of staff turnover which lead to staff shortages and higher operating costs for retailers, a liability that is magnified among operators who run small-to-medium stores and distribution outlets.

On the one hand, retail investors cite lack of adequate skilled workforce as one of the leading challenges to their operations today, but on the other hand retail stores remain unwilling to invest in the resources required to up-skill their employees.

In many retail establishments, employees take it upon themselves to learn new skills and advance their knowledge in the sector having learnt from tradition to expect little institutional support.

Earlier this month several executives left ‘Jumia’ a leading e-commerce site and launched a new platform that they say is targeted at lowering the cost of living for Kenyans. The jury is still out on the success of the interventions the new player will bring to a sector that has been notoriously rigid in the face of a shifting consumer market.

Still, the rise of new players in the local e-commerce sector and the unwillingness of established corporations to stay in the market despite bleeding millions indicates that there is still much opportunity to be tapped.

Early next month, the eyes of the industry will be trained on the Digital Retail Africa conference set to be held in Johannesburg, South Africa at the retail hub of Sandton. The central theme of the conference will be a ‘new era of digital retail’ and is expected to draw dozens of investors and experts in the sector from across the continent.

It remains to be seen whether investors in the sector have learnt from the missteps and the forgone opportunities of the past years and are willing to strategically invest in the technological interventions needed today to improve customers’ experience and boost turnovers.

The writer is the chief executive of Maudhui House, a Public Affairs consultancy. Email: [email protected]

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