BY VICTOR ADAR
Titus Ing’au, a driver working for a private accounting firm in Westlands is fond of buying smaller packaged items from as low as 100 bob especially during mid month. The items usually include margarine, airtime, soap as well as other basic stuff such as milk, bread, flour and cooking oil.
“Small equals big,” he says. “There is a difference. When I buy items in bulk, I end up misusing. I would rather buy 250 grams of margarine than 1Kg to help me save. I will apply very little of it on bread and save some cash in the end.”
Back in the estates there are shopkeepers who are gaining the advantage by selling the small packaged products. And customers get to buy according to the amount of money that they have. Mr Ing’au says that a quarter of sugar is sold from as low as Sh25, and drinking chocolate or coffee does not cost much either as Sh30 can get you at least three sachets … it is a business trend that is thriving in small estates and satellite towns.
“I look at it the same way I look at water. If you fetch a lot of it, a lot goes to waste. If you have little water, you try and use it well,” Ing’au explains, citing how at times small retailers can also get unpredictable to an extent that makes ‘kadogo’ products dominate the scene.
Where a shop stocks only one to two kilograms of flour on any given day, he adds, you cannot ask for a five kilogram even if you have the money. Though in a small way, the “kumi kumi” items (as he calls them) has seen his savings rise, and chances of him missing out on basic things especially during the times that he is operating on a shoe string budget.
“We like the small products because once in a month there are things which are expensive when bought in bulk. I know we can’t compare oranges to apples. But if you can ask any Kenyan the difference between the two fruits, they’ll tell you that oranges cost less compared to apples. Why don’t you then buy one apple and four oranges instead of buying five apples which will cost you much in the end?” Inga’au poses.
Like the idea of 99 Cents Only Stores was a game changer in the US, on Muindi Mbingu Street of Nairobi is Shop 100, which is thriving on items from as low as Sh100. The trend of discount retail stores (or, repackaged retail products) has also vastly been popularised by small time retailers. As part of the fight to get a pie of this bottom market, we have seen super markets also moving into the territory. Nakumatt is one example that packages not only their own milk and maize flour from small to big sizes, but also cooking oil and sugar, just but to mention. If you walk into any Kenyan house you are likely to find small packaged product like half a kilo of Daawat rice, a small tin of blue band margarine, or a box of Manji Biscuits.
Visit any super market and you will spot Kenyans buy a small pack of diapers, a kilogram of sugar, a litre of cooking oil and family bread. The assorted items will cost at least Sh1000 with some loose change to take to a piggy bank. This trend is real but enterprising people say this lot misses the benefits of economies of scale thanks to the cost of tiny packages, which is pushed to them. It may not be a big deal if you were to ignore the price, but beyond the low cost of buying, what is the value for customers?
This kind of multifaceted future of retail business where both the have and the‘have-nots’ have the purchasing power spells a brighter future as everyone is simply buying what he or she can afford.
Experts say that what drives re-packaging items to capture low end of the market is not the millionaires (the retailers) but the need to change fortunes of the bottom-bulk consumers who operate on a small budget. Consumers can buy products up and down whereby; you might think your market is targeted at the lower end when majority consumers of your goods are actually the wealthiest in town.
A report from McKinsey adds that by 2025 (globally) a staggering 4.2 billion people will be a part of the consuming class. And that it is the emerging markets that will experience higher growth. Further, being closer to the rapidly expanding customer base is what counts – which is why regardless of big players (picture super markets) also entering this space it does not spoil the business, as the market is big for both small time retailers and giants.
If this trend of the growth of low-end market is anything to go by, fast moving consumer products manufacturers for example, might consider introducing new product lines at affordable prices so that the tiny spenders and less affluent consumers are not left out. Thus the idea of soap manufacturers come up with dishwashing liquids, albeit in the much needed sizes will keep Kenyans going.
Their impact is really being felt by those still on their way up, mainly in busy estates in which peoples’ professions are scattered – usually areas with a mix of individuals in the informal jobs (popular as Jua Kali) and a small percentage of others struggling in the formal sector. It could be that casual labourers who can spare as little as Sh200 a day are advantaged. The small packs are affordable to help one avoid going on an empty stomach, for instance.
Described as a proportionate saving in costs gained by an increased level of production, it is large firms, which more often than not gain from economies of scale. But when giants become too large they suffer from what is called diseconomies of scale.
