Listed enterprises record 50% increase in sales
Nabukeera Plaza is a large building in downtown Kampala which is home to an extensive array of cubicle-sized shop where an army of traders peddle clothing, home appliances, personal care products, food and drinks and more. That description fits any of the numerous malls in Kampala that house many small enterprises dealing in general merchandise that were beacons of shopping in the past but, in reality, attract very few these days.
Part of the reason for the malls change in fortune is the growing phenomenon of online shopping. As Patrick Kawooya of Diva Fashions Star located in Nabukeera Plaza, many shoppers in fact do not go anywhere near malls. He said listing his business online in collaboration with a major online shopping website has exposed his business to more new customers.
“Many of them would never have physically visited my shop at Nabukeera Plaza, he said in an interview on April 29. He says his enterprise has seen its total sales per year improve by about 50%.
Online shopping is gaining momentum in Uganda largely on account of increased internet penetration currently at 40% alongside growing numbers of cheap internet enabled devices that facilitate the shopping.
It is part of a global trend. According to data presented at the last World Economic Forum (WEC), the number of devices connected to internet has shot from 1 million in 1992 to 28.4 billion today and is expected to rise to 50.1 billion in the next three years.
A leading online shopping player in Uganda, Jumia, says 440 small and medium enterprises (SMEs) were listed on its site by end of April, the highest number since June 2014 when the company opened shop in Uganda.
“For me it is all about saving time and energy,” said Esther Komuntale, a regular shopper at Jumia. Komuntale, a mother of two says sometimes goods bought online are slightly cheaper compared to those sold in physical shops.
Yet Sacha Polgnonnec, the Jumia’s group chief executive officer, says there is even more room for growth given that only about 16 million Ugandans are internet subscribers out of an estimated 26 million potential users.
Internet penetration, currently at around 40%, means there is still room for deeper penetration and seeking internet related services by Uganda’s growing middle class.
In a bid to get around the lack of internet connection barrier, Jumia plans to set up “Jumia internet cafes” in selected urban parts of the country to facilitate online trade. Although, according to Jumia, 80% of shoppers use their mobile phones to visit the site and 69% complete their purchase on their handset, the café idea aims to connect more shoppers to businesses.
Analysts believe that SMEs are an alternative engine for growth of any economy whenever they operate in a supporting business environment. When these SMEs expand, they create more small jobs, pay some taxes and boost demand or consumption of goods and services.
But the growth of online shopping has brought a new set of challenges to both shoppers and sellers.
Komuntale, for example, says she has twice refused to pay for items delivered to her after realising that they were not exactly what she ordered for.
“But I am happy that they always go back and bring what I want,” she said.
She says, however, it would be best if businesses selling online ensured that they deliver the exact items ordered by the customer.
On the other hand Kawooya said his enterprise only uploads items that are present in the shop in large quantities so as not to hoodwink customers. But he still gets customers rejecting ordered items.
The main issue is due to minor changes say in size of clothing and color. But some items are rejected after getting damaged while in transit to the customer.
“That means more costs on transport and time to deliver the right goods to the customer,” Kawooya says, “That has not had a significant negative impact on our business,” he says.
The numbers (Source: Jumia White Paper Data for 2017)
- Total Population (Uganda) 40.9 million Vs2bn total population for Africa
- Internet users (Uganda) 16.7 million with 41% internet penetration Vs 216 million users in Africa and 18% internet penetration
- Mobile subscriptions (Uganda) 26.6 million with 65 penetration rate Vs 960 million in Africa with 80% penetration
- Mobile internet subscriber penetration (Uganda) 33% Vs 28% in Africa in 2016