Kenyan e-commerce giants sweat under social media fire

E-commerce is one of the fastest growing sectors in Kenya, with start-ups attracting billions of shillings of investment every year. However, this trend is slowly reversing, with large companies and their investors suffering losses.

In 2022, startups in the sector received a record 29.6 billion shillings ($230 million) from investors, which was about 18% of the total amount raised by local startups this year.

The Copia programme, which was established in 2013 to bring e-commerce and financial services to middle- and low-income households, was among the programmes that received the highest amounts of funding this year, receiving about 15.8 billion shillings ($123 million).

Just a year later, Copia began sending out alarm bells, scaling back its operations by closing its Ugandan subsidiary. In May of that year, the company went into receivership, a last-ditch effort to fight before being liquidated to repay creditors if it failed to regain liquidity.

She’s not alone in this turmoil. Last March, Zumi, a business-to-business (B2B) e-commerce platform, also shut down after failing to secure follow-on funding to continue operations.

This is also the story of Twiga Foods, which has also used a B2B e-commerce model to bridge the market access gap for farmers in the country. After multiple staff cuts and layoffs, the company is now in financial trouble, struggling to regain its footing as some creditors demand liquidation.

Industry pioneers like Jumia aren’t having it easy either. The company shut down its food delivery business last year, citing unfavorable “operating environment and economic conditions.”

Sam Chappatte, the former Jumia CEO who left to start his own social commerce startup Kapu, believes the industry is young and like any other, some companies need to fail in order to teach others valuable lessons in the future.

“This is innovation, and all over the world, in every ecosystem in the world, everywhere in the world, it will take generations of teams and companies to seize these huge opportunities,” Mr. Chappatte said.

It must be acknowledged that some companies in the industry, such as Kapu, Wasoko, Kilimall and Jumia, are still doing well in the country, even as others, such as Zumi, have pulled out and Copia has made its plans known.

In reality, however, small businesses are quickly taking over a market that has traditionally been the preserve of e-commerce giants, thanks to social media platforms like TikTok and Instagram, which have made it much easier to sell online.

Ms. Victoria Kimani, owner of Greatcooks, a small business selling household goods in Nairobi’s Kamukunji Market, confirms the change. After taking her business to TikTok and Instagram in March this year, she says her sales have increased by almost 80 percent, and she has since doubled her staff to four.

“We now have a wide range of customers. We used to restock twice a month, now we restock almost every week,” she says. About seven out of 10 items she sells now go to her online customers.

Peter Kironji, CEO of social commerce company Twiva, admits that times have changed due to the increased penetration of social media and the inability of traditional e-commerce platforms to adapt to changing seasons, which is part of the problems plaguing the industry.

“The path to market is changing. It’s being democratized and decentralized through social media,” says Mr. Kironji.

Mercy Kimalat, CEO of the Start-up and Small and Medium Enterprises Support Association of Kenya, says the challenges are not unique to e-commerce and are mainly political.

“It always comes down to politics and regulation because even for startups to grow and reach the level at which they operate, there has to be a legal framework that will attract investors to come to the country and invest,” Ms. Kimalat said.