Home ECONOMY The on-demand economy and its implications for brands entering Kenya

The on-demand economy and its implications for brands entering Kenya

by biasharadigest

By William Benthall.

A Kenyan 18 year old has more in common with a Chinese 18 year old than with his own parents, claimed a recent consumer insights report.

Hyperbole aside, there’s an important truth here: the way in which youth experience the world, driven by the internet and new technology, is similar no matter where you’re from, and this is fundamentally different to the ways any previous generation experienced life.  

There is a growing group of slightly older consumers who are also experiencing life in a new way. Urban professionals are busy, connected and always in a rush. They are seeking efficiency and convenience in their lives and they are looking for help. 40-50% of urban professionals are willing to spend more on services that help them to make better use of their time, and they are the driving force behind a new multi-billion dollar economy.

Over the past few years, this ‘on-demand economy’ has become increasingly important globally with Kenya an important hub in Africa. 

Before diving into this, I’d like to hit the rewind button and look at the music industry. It was one of the first industries globally to connect with consumers on demand. I started my first job at EMI Music in 2003 and in the same year, iTunes music store launched.

This was the first mainstream legal store for purchasing digital music and a really important moment in the evolution of the on-demand economy. Before this point, if you wanted to purchase a song, you had to take a bus to a record store and buy a full CD album. With iTunes, consumers could now make a purchase from the comfort of their home and consume it instantly.

Fast forward to 2019 and consumers have come to expect the same convenience and instant gratification around urban services and physical products. For a few years now, people have become accustomed to using services to request a ride on their phone and achieve real world satisfaction within minutes.

Instant gratification around physical products is still quite new but it’s happening now, and there’s nowhere more popular for these services than cities with terrible traffic. No one wants to sit in a traffic jam to go to a shop. But neither do people want to wait days for a standard e-commerce delivery, often a scheduled delivery slot later in the day.   

Several companies have entered Nairobi recently to cater to these consumer trends. My Dawa delivers pharmaceutical products in minutes. Glovo allows users to order anything, from any store in Nairobi and it will deliver the product to you immediately. Whether hot food for lunch, the groceries you need to cook dinner in an hour, a present for a loved one, or a courier to collect mandazi from their favourite kibanda.

The on-demand economy is opening up incredible opportunities for traditional businesses to engage new customers. To leverage these new opportunities, businesses need to think about consumers in a new way. Where are consumers now making their purchasing decisions? In the kitchen preparing for a dinner party? In the kid’s room as the last diaper is thrown into the trash? How are these consumers purchasing and who are the right partners to help you to connect with them?

Some manufacturers and wholesalers will spy an opportunity to bypass traditional retail and sell direct. Apple became a $1 trillion market cap company by selling direct but other giants have struggled. I was a Director in Sony Music’s Direct to Consumer division at a time when Sony was investing heavily in leveraging its impressive brands to sell direct: Beyoncé, John Legend, Vaio Computers, Bravia TVs to name a few. But across Sony, the strategy never really took off and retail sales have remained hugely important for the company.

Traditional bricks and mortar retail is still hugely important to the on-demand economy, the more localized and accessible the better. Across all regions, Nielsen reports that smaller stores are posting higher growth for FMCG brands than larger ones. Multi-category on-demand apps will help amplify these sales; in its most efficient markets, Glovo delivers groceries in just 22 minutes which is just a fantastic proposition for everyone. In Nairobi, shops that aren’t buried within large shopping malls have an advantage.

We’re entering a golden age for the consumer with a surge in investment in on-demand services. Ride-hailing apps are looking to leverage their customer base to offer new services. E-commerce giants are moving to same day delivery. Companies like GoJek from Indonesia and Glovo from Europe are already operating in the multi-category on-demand space, leading the way with a relentless focus on meeting the varying needs of busy people.

William Benthall is General Manager of Glovo in Kenya and a Non-Executive Director of the strategic development consultancy Adam Smith International.

This OpEd is adapted from a session he gave at DigiTalk in Nairobi.

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