Untapped rural areas future of e-commerce, study shows
Monday June 19 2023
Jumia food delivery man running an errand using his bicycle in Nairobi, Kenya on July 8, 2022. PHOTO | JEFF ANGOTE | NMG
Rural areas may be the untapped market for e-commerce dealers, offering a signal of how the future of virtual trade will look like.
A study by internet retail platform Jumia shows that this market, however, is underreached because of lack of critical infrastructure such as roads and internet penetration.
The report also reveals that market fragmentation, poor supply chain networks and lack of clearly named streets or buildings have combined to slow down the expansion of e-commerce by increasing cost of delivery, especially outside of the major cities.
In Kenya, for instance, Nairobi and Mombasa accounted for nearly 62 percent of all online shopping orders for Jumia with only 23 percent of orders made online coming from the rural parts.
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Beauty products were the most ordered items on the platform by Kenya’s rural dwellers, accounting for 16 percent of all rural deliveries. This was followed closely by home items such as television sets, furniture, video or audio players and mobile phones.
Most of these products were ordered on the platform either because they are scarce in the local retail outlets, or because they are not available in variety.
Local retailers were reluctant to stock up some of these products for fear that they would not sell.
“More than 72 percent of Kenya’s population lives outside the main cities, and access to a supermarket is challenging in such areas.
“This presents an opportunity for e-commerce to grow and meet the rising demand in these areas,” said Charles Ballard, Jumia Kenya CEO.
The firm has posted losses amounting to $87.8 million since it started operating in Kenya in 2013. It says understanding the market can help it turn around.
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The findings complement data released earlier by the Communication Authority of Kenya that show that as of September 30, 2022, there was a mobile money penetration rate of more than 75 percent in Kenya, highlighting the growing popularity of mobile money and e-commerce transactions by businesses and individuals.
Last month, online delivery platform Uber Eats released data indicating that in 2022, the number of orders increased by 5.2 percent from 2021 figures, resulting in a 21 percent year-on-year growth in revenue, partly attributed to tapping into new markets in rural areas.
“On demand delivery has become more than just a convenience play. It has become a necessity for consumers,” said Uber Eats Kenya general manager Wangui Mbugua.