Kenya has grown to become the third largest e-commerce market in Africa, driven by increasing internet penetration that has made it an attractive market for investors.
Statista, a German data and business intelligence platform, ranked Kenya third in e-commerce market penetration on the continent at 46.7 percent. This percentage comes after Egypt, which came in first place with an e-commerce penetration rate of 55.4%, and South Africa (49.4%). This is an improvement from being the fourth fastest growing e-commerce economy in sub-Saharan Africa based on 2020 UNCTAD analysis.
However, Kenya's improved rating comes at a time when e-commerce companies continue to suffer significant losses that have prompted some to exit the market. For example, Jumia, which had accumulated losses of $87.8 million (Sh11.5 billion) by the end of 2021, has closed its food delivery business in Kenya along with seven other countries in Africa.
Other players, including SkyGarden and OLX, have faced several challenges in the market, prompting them to close their businesses or find buyers.
In 2020, Statista revealed that e-commerce in Kenya topped digital revenue with a 76.1 percent share valued at $1.1 billion. The growth of e-commerce has been enhanced through the implementation of the Digital Economy Plan targeting the ICT sector and e-commerce activities.
In addition, the proportion of Kenyans over the age of 15 with mobile money (68.7 percent) or bank accounts (50.6 percent) has increased over the years.
Design | Stanlaus Manthey | Compiled by John Waweru Sources: Kippius, Statista
It is worth noting that the number of individuals using the Internet has tripled within a decade from 7.48 million users in 2014 to 22.7 million in January 2024.
As a result, more Kenyans can now transact online due to the high usage of advanced mobile money systems such as M-Pesa.
In a recent report from Kebios, e-commerce revenues were drawn primarily from electronics ($366 million), fashion ($280.3 million), toys and hobbies ($45.5 million), and furniture ($32.2 million).
The report also noted the share of Kenyan internet users involved in e-commerce activities. Kenyans who buy a product online placed at 37.6 percent, followed by those who use online price comparison services (15.7 percent).
However, some challenges are hindering the growth of e-commerce in Kenya such as the regulatory framework following the imposition of the Digital Services Tax in 2020.
The lack of good fraud detection and prevention mechanisms in many African countries makes it difficult to develop and build trust in the continent's markets, leading to delays in the adoption of e-commerce.
Therefore, there is a need to reduce the cost of technology, enhance cybersecurity, make the regulatory environment conducive, and improve logistics services to attract more companies into e-commerce.