Innovative retailers turn to the web to drive their start-ups

Susan Kimanzi is profiting from business deals that have escaped the eye of the Nairobi Securities Exchange (NSE).

Every few months, she enters into contracts with farmers to purchase their lettuce, carrots, and other vegetables several months before they mature. She is trading in futures.

She is willing to pay a premium for the produce she buys. Months after placing a down payment on vegetable seedlings, she will go back to the farms to collect the produce, just in time for the market.

In an interview with Money, Ms Kimanzi said she hardly worries about making losses. Instead, she is assured of a ready and steadily growing market for her purchases via her virtual shop — Fresh&More.

“I have always had an interest in food. I have always enjoyed cooking it, sourcing for it. I have never been happier. If not for the Internet, I don’t think I would be living my passion,” said the former general manager in a security company.

Fresh&More is a budding investment. The online shop opened its doors in December 2011. Unlike many start-ups that are on the edge of collapse for one reason or another, Ms Kimanzi says she had to revise her earning projections upwards in her first year of business.

User-friendly interface

“I underestimated my business and how well we could perform,” she told Money.

Her company sells and delivers fresh produce via the Internet. When the business started, she had a weekly customer base of 78. Nowadays, she records 180 customers every two weeks on average.

And with each of her products going for as little as Sh50 or as much as Sh1,700, it is possible to compute that in a good week, she makes a substantial amount of money.

The decision to turn to an Internet-based venture was born out of a growing sense of frustration at her former workplace.

At the time, an opportunity presented itself in the form of friends who wanted a more convenient way of doing their grocery shopping.

“I build the website myself in seven days. It was quite easy,” she says. And in order to attract more customers and cut on the costs of setting up a website and marketing, she used a Google service — Kenyan Businesses Online (KBO) — which is targeted at small businesses. KBO offers free domains and a user-friendly interface that allows users with near-basic computer knowledge to set up an online presence.

There are hundreds of businesses in the directorate looking to tap into Kenya’s increasingly Internet-savvy consumer base.

Despite this, Google statistics show that only 1.9 per cent of Kenyan small businesses use the web.

“Many people feel that using the Internet as a business channel is expensive, intimidating, or difficult to understand, but there are plenty of free, easy-to-use tools available to companies of all sizes,” said Google’s communication manager, Ms Dorothy Ooko.

Notwithstanding the difficulties that companies face, the Internet is still a vastly different landscape from the one that confronted Mr Segeni Ng’ethe when he launched his business.

Twelve years ago, at the height of the first Internet boom, MamaMikes — a gifting service business — went live from his apartment at Stanford University, US.

Mr Ng’ethe rode on the flair of “Pan-African” idealism and passion to start the online gifting venture.

“I had just learned how to programme. I wanted to do something with programming for Africa,” he said.

In the beginning, his venture was a briefcase business that helped Kenyans living in the diaspora to “take care” of their families home by purchasing gift vouchers, airtime, and paying their electricity bills.

He moved back home in 2004 but his business did not make a profit until 2005.

“It wasn’t an overnight success. I had to sweat and sacrifice a lot, including my passion for programming before it became viable,” says the 37-year-old entrepreneur.

More than a decade after its Stanford years, MamaMikes has survived the first Internet explosion and is riding on the second boom to cement its place on the Kenyan e-commerce scene.

MamaMikes processes 1,000 orders a month on average.

Last year, the company won a cash injection of Sh4.3 million ($50,000) through the government’s Tandaa grant, which will partly fuel its ambitious expansion plan regionally.

Mr Ng’ethe’s biggest hurdle, and one that he says many entrepreneurs using the Internet as a business platform face, has been building trust among his target market.

He has had to go to great lengths to prove that he is not a conman, emphasising the quality of his service and offering money-back guarantees.

Such mistrust has not been alien to Ms Kimanzi either. To cement the trust, she replaces all products which customers may deem damaged — for free.

“Trust is crucial to the success of the online business. If you can’t create it and maintain it, you are playing to lose,” says Mr Kennedy Kachwanya, a technology blogger and commentator.

When Mr Kachwanya moved to mark his place in the online market in 2010, the Internet was not alien to him.

Unscrupulous business people

His start-up, Maduqa, is now two years old. It is modelled on the conventional Kenyan soko.

Traders create accounts and set up their products for sale to customers.

Maduqa has aggregated a payment system and makes its money from fees on the services offered.

The venture now has a directory of about 1,000 Kenyan businesses. Although Mr Kachwanya and his business partners try to restrict themselves to a facilitative role, they sometimes find themselves answering for unscrupulous business people who use their marketplace to con Kenyans.

“We have to screen all the businesses that use our platforms,” he says.

All the same, some issues remain unsolved. Maduqa’s growth, says Mr Kachwanya, is held back by supply chain challenges that unique to Kenya.

Without a comprehensive physical address system, he says, it is difficult for the businesses that list on his site to make prompt and safe deliveries.

For Ms Kimanzi and Mr Ng’ethe, who both claim to be masters of geography, the supply chain hiccups are different.

Because she deals in commodities whose prices change according to the season, Ms Kimanzi has to keep her site updated with near real-time accuracy or risk suffering losses if her prices are lower than the market reality.

“Any entrepreneur who wants to use the Internet for their small business should manage their website and change information on command. If you rely on a remote web manager, you will be held to ransom,” she exclaims.

Further, she still largely relies on cash and mobile money payments for her transactions.

She has tried, in vain, to integrate credit card and payment gateway services such as PesaPal on her site.

“If a company’s database is breached, the criminals should not be able to get all the information about a card holder. Part of the card number, the names, and other bio-data should always remain hidden,” said Mr William Makatiani, a consultant at security firm Serianu.