E-commerce and performance of online businesses in Kenya
E-commerce has experienced unprecedented growth following the invention of the internet. The creation of new business models such as online companies whereby the company conducts most of its business on the internet. Indeed, there is little doubt that the internet has made it possible to start a global online business than it was it ever was to start a business before. Trading online while fraught with different challenges has been found to pose significant benefits to businesses, consumers and even the society in general. Online companies in developed economies have been largely successful contributing to the economy and in job creation. While the e-commerce sector is still in the formative stages in Kenya, consumers are opening up to the idea of online shopping and relatively few fully fledged online companies are already in operation in the country. The objective of this study was to establish the challenges and benefits of online trading within the Kenyan e-commerce sector. Further it also sought to establish the performance of existing online businesses as well establish the relationship between e-commerce models and performance. The study targeted 30 online companies based in Nairobi County and a cross sectional survey design was adopted. The study findings revealed that some of the challenges affecting online businesses but to a moderate extent are: potential customers reluctance to shop online due to desire to touch/interact with the product prior to making a purchase, lack of personal contact with customers which might be beneficial to business, e-commerce software incompatibility with existing infrastructure, customer distrust regarding privacy of personal data and finally and customers a general lack of trust for online businesses. Further the findings indicates that they are massive benefits associated with online trading. The top rated benefits included cost reduction for the business, ability to reach more potential customers, access to regional and/or global markets, easier and faster to serve customers, customers’ ability to access the business on a 24/7 basis, better prices to customers, enhanced collection of customer data, higher quality customer service, increased business visibility through search engine marketing and convenience to customers. The study further revealed that a majority of the online business (63.2%) are still in the start-up stage, 73.7% attract less than 100,000 unique visitors to their websites and a further 78.9% attract less than 100,000 repeat visitors, 73.7% have revenues below IM KES per month and 78.9% serve less than 1,000 customers per month. The current performance of these businesses pale in comparison to similar businesses in developed economies. There was found to be a positive correlation between the C2C e-commerce business model and the performance in terms of unique and repeat visitors to the website. Further, the nature of the product in this case -information and payment mechanism are good predictors of this relationship. The study recommends that in order to improve customer trust in online businesses the business owners need to invest in the requisite technology and systems to secure their customers and their business as well as create consumer awareness to negate this poor perception. On the other hand, the government needs to invest in the enactment of laws and regulatory infrastructure that supports online purchasing. Most importantly Kenyan consumers have to be more willingly to purchase products and services online. Finally, the government has to look into policies and invest in systems that will improve the current internet penetration rates across the country if the e-commerce is going to thrive.