Electronic commerce (e-commerce) has been one of Kenya’s fastest growing sectors with start-ups attracting billions of shillings in investments every year, but the tide has slowly turned leaving giant firms and their investors grimacing in pain of losses.
In 2022, sector startups received a record Sh29.6 billion ($230 million) in investor funding accounting for about 18 percent of the total amount raised by local startups that year.
Copia, which was launched in 2013 with a model seeking to bring e-commerce and financial services to middle and low-income households, was among those that received highest funding amounts in the year, getting about Sh15.8 billion ($123 million).
Just a year later, Copia had started sending distress signals, scaling back its operations by closing down its Ugandan subsidiary. In May this year, the firm went under administration, a process meant to give it the last fighting chance before it is liquidated to repay creditors if it fails to recuperate.
It is not alone in this turmoil. In March last year, Zumi, a business-to-business (B2B) e-commerce platform also shut down after failing to raise follow-up funding to continue its operations.
Such is also the tale of Twiga Foods, which also used the B2B e-commerce model to bridge the market access gap for farmers in the country. After multiple scale backs and staff layoffs, the firm is currently in financial turmoil, struggling to regain its footing, as some of its creditors call for liquidation.
Industry pioneers such as Jumia are not having it easy either. The company closed down its food delivery business last year citing unfavourable “operating environment and economic conditions.”
Sam Chappatte, former Jumia CEO who left to start his own social commerce start-up Kapu, believes the industry is young and just like in any other, some firms have to fail to provide valuable lessons for others in the future.
“This is innovation, and all over the world, every ecosystem around the world, every place in the world, it takes generations of teams and companies to crack these big opportunities,” said Mr Chappatte.
Granted, some firms in the industry like Kapu, Wasoko, Kilimall, Jumia, among others continue to thrive in the country despite others such as Zumi bowing out and the likes of Copia sending red signs.
But in reality, small time traders are rapidly eating into the market that was traditionally preserved for these e-commerce giants, thanks to social media platforms like TikTok and Instagram, which have significantly democratised the ability to sell online.
Ms Victoria Kimani, proprietor of Greatcooks, a small business selling household items in Nairobi’s Kamukunji market, testifies to this shift. After listing her business on TikTok and Instagram in March this year, she says her sales have improved by close to 80 percent and has since doubled her employees to four.
“We have a wide variety of customers now. We used to restock twice a month, now we restock almost weekly,” she says. Today, about seven out of every ten items she sells go to her online customers.
Peter Kironji, CEO of Twiva, a social commerce company, admits that times have changed amidst increased social media penetration and the slackness of traditional e-commerce platforms to adapt to seasons is part of the problems ailing the industry.
“The route to the market is changing. It’s being democratised and decentralised by social media,” argues Mr Kironji.
Mercy Kimalat, CEO of the Association of Start-up and SMEs Enablers in Kenya says the challenges are not unique to e-commerce and have to do mostly with policies.
“It always comes down to policy and regulation, because even for the startups to thrive, and reach that level where they are operating from, there must be a legal framework to attract investors to come to the country and invest,” Ms Kimalat said.
