Whitepaper: The Growth of the Smartphone Market in Kenya

The Kenyan smartphone market continues to experience substantial growth and it is easy to see why. The combination of a strong economic climate and increasing internet and mobile connectivity has created a favourable competitive landscape which has brought more brands and cheaper devices to the market. This white paper explores these trends and delves further into how consumers in this market are using and choosing their smartphone devices.

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The smartphone market is growing

Kenya is a country to watch: With an average GDP growth of 5.8% over the last three years it can in 2015 lay claim to the title of the world’s third fastest growing economy. Its mobile and internet penetration are among the highest in Africa at 83% and 58% respectively of the 44.35 million population. And a burgeoning middle class today makes up 22% of the country’s population.

The estimated number of internet users stands at 26.1 million, making Kenya the 21st most connected population in the world. Of those, 99.9% access their internet through mobile data. While feature phones still dominate, smartphones are catching up fast. In 2015 so far, 58% of all phones that were sold in the country, an estimated 1.8m devices, were smartphones. This represents substantial year on year growth of 112%, compared to just a 3.6% increase in the feature phone category. Regionally Nairobi is still significant, currently generating over 42% of the smartphone sales in the country.

This incredible growth has been driven by medium-term macroeconomic and policy factors as well as more recent competition among telcos and handset makers. Starting in 2009, the Kenyan government has been investing in undersea fiber-optic cables which continue to expand internet penetration rates in the country at a rapid pace. According to the Communication Authority of Kenya, this new infrastructure has been the main driver behind a massive 25% YoY increase in internet subscriptions in Q4 2014 alone.

At the same time, fierce competition between telecommunications companies has been steadily decreasing the cost of data, with secondary telcos aggressively challenging the incumbent leader Safaricom, whose share of them market is 70%. Consumers, eager to take advantage of offers from different companies, are therefore investing in dual-SIM smartphones. These types of devices experienced a healthy YoY growth of 35% in Q4 2014.

A new brand landscape

Kenya’s economic boom and increasing internet connectivity has made this economy a very attractive market for new entrants in the smartphone market. In recent years, the country has seen an influx of newer Chinese brands bringing high-spec, low cost phones to the Kenyan market. According to GFK, over the last few years the number of brands selling smartphones has increased from 15 to 22. This has affected the competitive landscape in the smartphone market such that it would not be an understatement to claim that the ballgame has completely shifted: in the MEA region, smartphones priced under $100 captured 5% of the market in 2013. This increased to 20% by 2014. In Kenya, the growth in smartphone sales by number of devices was 90% higher than the growth in revenue in 2014, suggesting that average price points are dropping steeply.

Many new vendors have taken advantage of this golden price point and launched new devices which have led them to be able to effectively challenge the dominance of established players. This has driven incumbent brands to respond to the competition with their own low to mid tier models. As a result, price points of smartphones have gone down across the board, making the technology available to a much wider segment of the general population.

This is reflected in retail figures: The average cost of a smartphone on Jumia, Kenya’s biggest online retailer, was around $100 in May 2015, down from over $200 a year ago. While the overall handset market in Kenya is dominated by Nokia, Tecno and Samsung, who together control around 75% of the total volume, newer brands such as Infinix, Innjoo and Wiko, whose flagship devices all sell for under $100, are making a name for themselves in the smartphone segment. This has led to a more fragmented smartphone market as a whole over recent years. While in 2011, 70% of the market’s volume was captured by just 4 brands, this figure has now increased to 7.

Usage habits are evolving

In May 2015, Jumia conducted original research based on a survey of 576 Kenyan smartphone users to delve deeper into how consumers in this market are choosing and using their smartphone devices. The survey responses were collected through Jumia’s network, including callers to its customer service line and social media followers. They should therefore be regarded as a sample representing a typical consumer that e-commerce companies in Kenya might target.

36% of survey responses were Female and 64% male, broadly matching the demographics of internet users in the country as a whole. The biggest age bracket was 25-34 year olds, at 59% of responses, followed by 18-34 year olds at 30% and 35-44 year olds at 10%. Just 2% of the respondents, or 10 individuals, were aged over 45.

The survey results support the wider economic trend of rising smartphone sales: Almost half of all Kenyan smartphone users in the survey bought their most recent smartphone less than 6 months ago. However, it was the first smartphone for only 7% of respondents. 2012 marks the year that first-time smartphone ownership ballooned, with 67% of users purchasing their first such device since then. This trend is strongest for 35-44 year olds, 75% of whom waited until after 2012 to make the jump, while 25-34 year olds were the clear early adopters with 45% investing before that time.

The average number of smartphones ever owned by Kenyans is a whopping 3.1, with that figure being 24% higher for men. The biggest gender gap by age was found in the 35-44 year old segment, with men having owned 47% more smartphone devices over their lifetime than women. This may suggest that men are more responsive to new technologies in that age bracket. However, this is not a concern at all when considering 18-24 year olds, for whom lifetime smartphone device ownership is almost equal at 2.9 for women and 3.1 for men. Despite the fact that young people generally make less money, it is clear that they are willing to invest more to keep up with the latest technology consumer products.

Usage patterns

We asked smartphone users what activities they use their device for. The most popular activity was chatting and social networking at 78%, higher than calling which was named by 75% of users. E-mails and online browsing both accounted for 69%, followed by the data heavy activities falling under entertainment; 57% of respondents played games, listened to music and watched videos on their smartphone.

49% of users claimed to use their smartphone for online shopping, pointing to the fact that the sample was taken from the network of Jumia.co.ke, Kenya’s biggest online retailer. In a recent IPSOS survey, 1% of all internet users country-wide claimed to pursue this activity.

The least popular activities were online banking at 26% and checking weather, sports scores or the stock market at 25%. The latter however had the biggest variation among the genders: 113% more men claimed to use their smartphones for this than women.

Unsurprisingly, the 18-25 year bracket is much more likely to use their smartphones for academic purposes: 33% above average. Conversely, this age group was also 33% less likely than average to use their smartphone for online banking. Another outlier was that 35-44 year olds were not keen on using their smartphones for entertainment purposes and did this with 26% less likelihood than the sample size taken as a whole.

Frustrations

When asked about their biggest frustrations with smartphones, the answer was clear for all: 78% of respondents named battery life as the feature most deserving of improvement. This was followed by 47% who mentioned memory and 36% that mention program crash and general instability as problem areas that they experience.

The youngest demographic distinguishes itself as the most critical. 18-24 year olds selected an average of 3 smartphone issues they are frustrated by, while for others the average was around 2.5. This age group is also 35% more likely to be frustrated by data privacy concerns, 24% by program crashes and 22% by camera quality.

Purchase drivers

When it came to main purchase drivers, Jumia asked respondents to name their 3 most important out of 6: Price, Brand, Memory, Camera, Size and Battery life. It is clear from the responses that Kenyans are savvy consumers looking to get the best features for their money. The top 3 purchase drivers were memory at 72%, battery life at 59% and camera at 56%. The brand of the device was only mentioned by 44% of respondents as being one of the most important considerations. Females however were 15% more likely to list brand than males, and 10% more likely to list the camera capabilities. And though screen sizes have been steadily increasing in recent years, Kenyan consumers seem to be happy with what’s on offer, with only 33% considering this feature key to their purchase decision.

When looking at these purchase drivers by age group some interesting and perhaps counter-intuitive insights emerge. The 18-24 age bracket named price at a 5% lower rate than the total sample size, while 35-44 year olds were 14% more likely to be swayed by price. This older segment also cares 11% more about the brand of the device and an entire 25% more about the size of the device. For the youngest demographic, Memory, Camera and Battery life are all 12% more important compared to the overall share of responses prioritising these features .

Putting the data into practice

For Kenyan consumers, quality is king. Our survey results support the wider economic trends: Kenyans are above all looking for value for money. This means that they are willing to shift brand loyalty if they can find better features and service for a better price.

Brands wishing to get ahead must therefore keep innovating on their smartphones’ features, put attention into great after-sales support and get creative in order to win the price war. In recent years, interesting examples of industry partnerships have emerged that have enabled device makers to further strengthen their value proposition to Kenyan consumers.

With Retailers (Eg: 6 top smartphone brands have partnered with Jumia.co.ke for a week long sales promotion called #JumiaMobileWeek in June 2015. The online retailer invests in marketing on the brands’ behalf, allowing them to keep prices low.)
With Telcos (Eg: Jumia has partnered with Airtel during its #JumiaMobileWeek promotion to give consumers 6GB free data on all deals that are part of the sale)
With App & Content producers (Device makers should consider partnering with app companies to pre-install content that will add value to the consumer. Eg: Samsung partnership with Dropbox for free cloud storage)