Ease of payment lifts Kenya’s online shopping demand

Ease of payment is driving an online purchase boom in Kenya despite hacking risk concerns, a new UN report said, raising hope for retailers keen on strengthening their performance.

An e-commerce report released last week by the United Nations Conference on Trade and Development (UNCTAD) showed that online shoppers in Kenya more than doubled in 2017 compared to three years earlier — ranking the country third in Africa behind South Africa and Nigeria.

The UN agency estimates that shoppers who rely on the Internet to buy goods in Kenya hit the 2.61 million mark in 2017 compared with 1.2 million in 2014.

The number of Kenyans logging onto online stores to buy goods is only dwarfed by South Africa’s 2.93 million, while Africa’s most populous nation, Nigeria, rules the online purchase space with a footfall of more than four million.

“It is estimated that there were at least 21 million online shoppers in Africa in 2017 or less than two per cent of the world total. Three countries (Nigeria, South Africa and Kenya) together, accounted for almost half of them,” UNCTAD says in the report. “The number of shoppers has surged by 18 per cent annually since 2014, higher than the world average growth rate of 12 per cent.”

The Kenyan numbers have partly been driven by ease of making payment for goods bought online, where Nairobi got the second highest score on the continent after Mauritius.

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, thanks to the high penetration of mobile money services such as Safaricom’s #ticker:SCOM globally acclaimed M-Pesa.

Nairobi scored 82 out of 100 on the online payment methods indicator — one of the four measures the UN agency uses to measure the readiness of a country to support an e-commerce explosion — improved from a score of 72 last year which was based on 2014 data.

The country also scored highly on Internet access levels, rising to 39 from 27 in the 2017 index.

The UNCTAD analysis suggests that the share of Internet users shopping online has risen to 24 per cent from 16 per cent in the 2017 e-commerce index which relied on 2014 statistics.

The UN body, however, revised downwards Kenya’s 2018 score on secure access to Internet servers, which act as a proxy for online stores such as Jumia and Safaricom’s Masoko, to 37 from 43 previously.

That means the risk of Internet servers being hacked was higher in 2017 compared with 2014.

The closer the score is to 100, the higher it is.

Nairobi’s score on a reliable postal delivery system for goods bought online also fell to 27 from 37 previously, implying online supermarkets were struggling to locate the address of their customers.

Kenya’s overall score in the 2018 UNCTAD B2C (business to consumer) e-commerce index — a measure the UN trade agency uses to gauge the environment countries provide to support online transactions — improved to 46.2 from 42.5 in the previous scoring.

The country’s global ranking for supporting e-commerce, however, fell seven positions to 89 out of 151 countries surveyed, implying a slower pace of improvement compared to other countries globally.

The UN ranked Kenya seventh in Africa in providing a conducive environment for online transactions behind Mauritius, which is ranked 55th globally, Nigeria (75), South Africa (77), Tunisia (79), Morocco (81) and Ghana (85).

The value of Africa’s business-to-consumer (B2C) market was $5.7 billion (Sh583.97 billion) in 2017, UNCTAD estimated, barely 0.5 per cent of the continent’s gross domestic product (GDP).

“While Africa needs to boost Internet penetration to grow e-commerce, it also needs to get more of its existing Internet users to trust the online market for making purchases.

“Unlike developed markets such as the European Union, where 68 per cent of Internet users made an online purchase in 2017, the corresponding figure in Africa was only 13 per cent on average in 2017,” the report states.

“If the ratio of online shoppers to Internet users in the region was increased to 50 per cent, an additional 77 million online shoppers would be added and the estimated B2C revenue (assuming average annual spend was halved) would more than double.”