Viffa Consult’s Victor Otieno on online opportunities for Kenyan SMEs

The potential of e-commerce to provide Small and Medium Enterprises (SMEs) in Kenya with alternative channels for existing customers, as well as access to new customers both locally and internationally, is a topic of discussion. According to the Communication Authority of Kenya, despite a low e-commerce market penetration of 0.5%, there is a significant opportunity for SMEs to leverage online tools for growth. Victor Otieno, Managing Director at Viffa Consult, sheds light on the challenges and recommendations for SMEs in the online space. Otieno highlighted the findings of a report done on the go-to market for SMEs in Kenya, emphasizing that SMEs in the country often rely on good product quality and customer satisfaction rather than active marketing efforts. This passive approach to marketing hinders their growth potential and limits their reach to both current and potential customers. Creating awareness through marketing is crucial for the survival of SMEs in the competitive market. One of the major challenges faced by SMEs, according to Otieno, is the low profit margins due to heavy investments in sectors like wholesale and retail. This limits their resources for marketing activities and makes it difficult for them to invest in e-commerce solutions. Additionally, issues like last-mile delivery and capacity building for e-commerce pose significant obstacles for SMEs looking to expand online. In response to these challenges, Otieno discussed the role of the government in supporting SMEs through market promotion and creating an enabling environment for fair competition. He suggested that the government should focus on exploring global markets and supply chains to help SMEs diversify their business models beyond traditional retail. By connecting SMEs to international markets, the sector could see significant growth and opportunities for expansion. When it comes to driving e-commerce growth in Kenya, Otieno emphasized the importance of policy and legislation to support the thriving of online businesses. He noted the efforts by the Ministry of ICT to develop strategies that enable seamless delivery and logistics for e-commerce. Additionally, he pointed out the need for capacity building initiatives to educate entrepreneurs on the benefits of e-commerce and how to effectively leverage online platforms. The onset of the COVID-19 pandemic accelerated the shift towards online selling for many businesses. However, Otieno noted that e-commerce penetration is still low, especially outside major cities like Nairobi. With over 90% of businesses in Kenya being micro-enterprises, the focus should be on ensuring that all businesses, regardless of size, have the resources and capacity to thrive in the digital economy. One key aspect that needs to be addressed is the preference for cash payment among SMEs. Otieno highlighted the need for payment platforms to be cost-effective and convenient for SMEs to adopt digital transactions. By developing payment solutions that reduce transaction costs and facilitate access to financing, SMEs can overcome barriers to financial inclusion and leverage digital payments for business growth. Overall, the potential for e-commerce to drive growth and expansion for Kenyan SMEs is significant, but requires a collaborative effort from the government, private sector, and stakeholders to create an enabling environment and support SMEs in their online journey.