Zoom In: Online Grocery Market Trends in Kenya


Market Overview

The growth of Kenya’s e-commerce ecosystem has been on an upward trajectory, thanks to mobile connectivity which has improved internet access, online payments systems that have facilitated transactions and the logistical infrastructure that is slowly taking shape in the country. According to Statista, revenue in the e-commerce market in Kenya was projected to reach USD1,716 million in 2021. The revenue is expected to continue rising at a CAGR of 11.65% for the period between 2021-2025; resulting in projected market volume of USD 2,667 million by 2025.

The e-commerce market in Kenya is categorized into five major segments namely; Electronics and Media which accounts for 40% of the revenues with a projected market volume of USD702m in 2021 followed by Fashion 32%, Furniture & Appliances 14%, Toys, Hobby & DIY 8% and Food & Personal Care 6%.  In the Kenyan market majority of the shoppers are urbanites aged between 25 to 34 years living in large cities like Nairobi.

COVID-19 Pandemic

The advent of COVID-19 global pandemic, saw the industry experience unprecedented growth. More businesses shifted towards the e-commerce space as their consumers were forced to seek safer shopping alternatives as a preventive measure against spreading the virus.

COVID-19 safety regulations imposed by the government led to an increase in demand for both online and local shopping, while the closure of hotels and restaurants entwined with a rise in remote working led consumers to shift their food spending from food service to grocery retail. Soon after the government announced the first case of COVID-19 in the country, physical visits to retail outlets and grocery stores in Nairobi fell by an average of 52% and 40% respectively.

The pandemic was a positive externality to established e-commerce players who saw a business opportunity in the COVID-19 restrictions that limited human interactions in public places such as churches, supermarkets, restaurants and gatherings.

Online Grocery Platforms that Thrived in the Pandemic

Jumia Kenya – the largest online marketplace for electronics, fashion, fast moving consumer goods (FMCG) and Twiga Foods – a B2B e-commerce platform for agricultural produce were among the first to exploit the opportunity. The two signed a partnership agreement that enabled Jumia’s shoppers to buy fresh produce as well as processed foods distributed by Twiga.  The shoppers could buy prepackaged bundles of fruits, vegetables, and processed foods from Twiga through Jumia’s platform for prices ranging between KES1,230 and KES3,180, saving them up to 50% on their grocery bills; compared to average supermarket prices. The bundles contained food items like watermelon, potatoes, tomatoes, onions, bananas, maize meal and processed milk which would be delivered to them for free if they were living in Nairobi and its suburbs on the same day they placed the order.

Glovo, a delivery platform that allows users to shop and or order for food from a wide variety of stores, and have the items delivered at their door steps, expanded its operations with its key partners, Zucchini, Procter & Gamble and Naivas in delivering FMCG and grocery items. Naivas also ventured into a direct online channel as an extension of the supermarket following its customer feedback on Twitter. Customers would order before 10pm and have deliveries done on the same day. GroceryPik, a local grocery focused e-commerce app, joined the bandwagon in working with Chandarana supermarket.

While these businesses have been active in the online grocery market during this pandemic, their main goal was to boost their core businesses of delivery or payments, rather than grow this niche in the e-commerce industry. The case is attributable to small profit margins from online groceries businesses even though the volumes sold are large. With their infrastructural capacity they can thrive as opposed to startups which are likely to struggle with generating revenues.

Return to Normalcy

As the Kenyan government continues with the Covid-19 vaccination drive across the country, it is expected that the steep growth rate experienced by the online grocery market segment during the peak of the pandemic will stagnate. In the next couple of years the growth rate is expected to decline  as normalcy kicks in.  However, there is a slight chance that some consumers will continue spending more buying groceries online after the pandemic is fully controlled because of their changed consumer behavior. Ultimately, the online groceries market in Kenya will not return fully to pre-COVID-19 levels but will to grow organically.

Reality Check

Is there a future for startups looking to venture into online grocery business?

E-commerce has generally thrived on the convenience that it offers its shoppers and for greengrocers and fresh food startups the online space does feel like an opportunity that can be exploited. Quantifying the total addressable market for the online grocery market is quite difficult in Kenya as there is not enough reliable data.

The few startups in this space try to offer cheaper prices, payment on delivery, quality products but they continue to face the problem of not having enough customers. Does this mean that the future of the online grocery market is bleak?

Business leaders and investors have become increasingly aware of the vast potential in Africa’s burgeoning consumer market which is home to more than 1.1 billion people with tens of millions emerging from poverty in recent years. There is a market for consumer goods but there are limited players in the business of delivering fresh produce in Africa nations

Most online grocery shops across Africa operate in three main sectors namely e-commerce, agriculture, and logistics, which face their own challenges.

Saudat Salami Founder and Chief Executive Officer of Easyshop Easycook, a multi-platform fresh grocery delivery company in Nigeria that uses technology to provide domestic support services to working professionals puts it in the context in an interview with Techpoint Africa.

According to Saudat, lack of infrastructure, especially cold chain in handling inventory is a big challenge in the agriculture sector. Logistics and delivery are marred with levies and taxes imposed by local council officials, while prevalence of online fraud sabotages consumers’ trust in the business. Also cultural and social conditioning where women are the ones responsible for shopping for food items and grocery in most African homes is a big barrier as it is difficult to scale without reconditioning and sensitizing them.

These challenges cut across the Kenyan market as well and there is a need for structural transformation through investing in infrastructural development in the different sectors involved. Saudat opines that the online grocery business is more than just building websites, mobile apps, or payment gateways. New entrants into this space need to have the knowledge and skills needed to build the industry and make customer satisfaction their priority.

Author: Inzillia Sasi