Using a firm’s popularity to capture new markets

As of 2014, the e-commerce market in Kenya was estimated to be worth Sh4.3 billion. file photo | nmg
As of 2014, the e-commerce market in Kenya was estimated to be worth Sh4.3 billion. file photo | nmg 

Kenya’s largest telco, Safaricom #ticker:SCOM has announced plans to enter the e-commerce market next year by launching a platform called Masoko, in a move that could rattle existing industry players.

As of 2014, the e-commerce market in Kenya was estimated to be worth Sh4.3 billion, according to the Communications Authority of Kenya, making it a lucrative market for a company with over 20 million customers countrywide.

Masoko will stock an array of products, from farm goods to electronics, offering merchants a chance to sell their products online and offline.

“If you look at Facebook and Instagram, there is a lot of online/offline selling that happens and one of the reasons why they are popular in Kenya is because small-scale, middle-scale merchants use it as a sales tool. What we are going to be doing is formalising that,” said Safaricom director of Enterprise Business Rita Okuthe, in an interview with Bloomberg.

In its new venture, Safaricom will also capitalise on the popularity of its mobile payment platform M-Pesa, making it easier for merchants and consumers to trade electronically.

In the first quarter of this year, mobile commerce recorded a total of 290.5 million transactions, with Sh627.4 billion used to pay for goods and services. Of this, M-Pesa accounted for 244.9 milliom transactions, with Sh432.6 billion used to pay for goods and services on the platform.

Against this backdrop, e-commerce platforms Jumia and Kilimall are braced for increased competition and may be forced to adopt new marketing strategies to retain their customers.

“When a leading company enters a new market, it is most likely to cause a shift in the industry. Consumers who are already using the brand can easily switch to its new product category because they trust its quality and its ability to meet their needs,” said Kevin Munyao, an entrepreneur.

“In the case of Safaricom, it has a ready market for its new product given its large consumer base. Therefore, there is need for current players to strengthen their grasp or adopt initiatives that can make their product more attractive to consumers.”

An example of a company that was successful after expanding its business into a new market, due to its large consumer base, is footwear manufacturing company, Nike.

In 1995, it announced that it would expand its business from the manufacture of golf shoes to balls and equipment, which led to increases in both its market share and profit.

“Nike was regarded as an amateur when it decided in 1995 to branch out from shoes to golf apparel, balls, and equipment. Four years later, however, Nike had scored priceless marketing victories—not once, but three times running.

First, the British Open champ wore Nike’s golf shoes in 1999. Next, Tiger Woods switched from Titleist golf balls, the leading brand at the time, to Nike golf balls in 2000.

And, finally, David Duval, the former world number one golfer, won his first major tournament just after switching to Nike golf clubs in 2001,” according to a case study by Bain and Company titled, Growth Outside the Core published in the Harvard Business Review.