Covid-19 has significantly altered certain human social behaviors. For instance, it is now seen to be perfectly okay to ignore someone. You would be pushing it if you ask for a hand shake. Essentially, the less contact the better. Which is why physical paper money has become a point of concern for health authorities as it is perceived to be one of the many super-spreaders.
For instance in March 2021, the Central Bank of Kenya announced that all currencies evacuated by commercial banks to its vaults would be quarantined for one week before being released back into circulation. But even more important, there has been rising demand for cashless transactions in areas of commerce where cash is predominant-such as public transport. And the cashless momentum appears to have gained some steam.
Latest statistics from the Central Bank of Kenya shows that the ratio of currency outside banks to total money supply averaged at six percent since the first lockdown in Kenya in March 2020 up-to-date, compared to seven percent in 2019 (and eight percent in 2018). The ratio is usually not a precise measure of cashlessness but is a window to its soul. Nonetheless, from it, we get an idea that the population has been transacting cashless. But that’s not enough. Courtesy of the internet, commerce has also began going contactless by way of electronic means (e-Commerce), albeit gradual. Payments firm Visa’s Covid-19 tracker survey released in June 2020 showed that as consumers and merchants focused on safety and hygiene, contactless payments increased with enabled merchants seeing an 88 percent growth in contactless usage.
There is also another evidence in the form of a joint 2016 National ICT Survey between the Communications Authority of Kenya and the Kenya National Bureau of Statistics (KNBS) which, inter alia, established that 39 percent of private enterprises were engaged in e-commerce.
Consequently, the pandemic seems to have accelerated contactless commerce especially by the medium and large entreprises. For instance, in the wake of the lockdown measures imposed by Kenyan health authorities, a number of the big retailers embraced online shopping (and delivery). When you think about the internet, which has this unlimited capacity as a free platform, then the opportunity is colossal (especially for small businesses). Statistics from the Communications Authority shows that internet penetration in Kenya made up 81 percent of total population, which is one of the highest in the continent. About 98 percent of the subscribers access internet via mobile devices, primarily due to (i) the declining cost of mobile data; and (ii) increased penetration of smartphones.
For any disruptive business, that’s a goldmine right there. In fact, emerging online retailers are already creating disruptions. And we have seen the emergence of new players such as Anko Retail, who are keen to take online shopping by storm.
But even beyond contactlessness, the pandemic has also disrupted route-to-market models for a number of companies. For instance, Nation Media Group has paywalled its content, allowing its customers to only pay-as-they-use (in fact, a number of media houses are now headed this way).
Even educational content delivery has now moved online with the likes of Kidato and Roodito setting the pace. Even the traditional side is getting more interesting with traditional players now reaching their customers directly through door-step deliveries (DSDs) and in the process creating a direct channels (away from channel intermediation). Players who have ventured into this space include Farmers’ Choice, Ruiru Mabati, Royal Mabati (you just place the order and they will deliver!).
For online retail, the pandemic has also injected some disruption to last-mile delivery. A number of smaller e-commerce companies have opted for disruptive delivery firms such as Pick-up Mtaani who are offering much more through aggregation and collection proposition. This has allowed the likes of Anko Retail to connect to customers who cannot access lifestyle goods that Nakumatt and Tuskys used to provide, all across the country, and they are building a fantastic execution network. Another added advantage is the fact that suppliers get to enjoy quick payment turn-around, improved margins and reduced concentration risks.
My point is that at a time when business survival depends on keeping costs low, a strong e-commerce proposition can enable retailers lower delivery costs and stay competitive and also build scale in the process. The availability of innovative mobile payments has also made sure even smaller convenient retailers can drive contactless shopping. In fact, the pandemic has also busted the myth that e-commerce and card payments are the preserve of the affluent and educated (which has proved to be not the case).
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