It is midday on Thursday the 29th of March, residents across Nairobi are getting ready for Easter celebrations, but my colleague, Diana, and I are setting off on “boda bodas”to interview a few kiosk owners in Kawangware who we have worked with in the past. Kawangware is one of Africa’s biggest slums, home to a population equivalent to that of Bristol or Toulouse.
However, it would be a mistake to assume that just because Kawangware is a slum, it doesn’t function like other urban centres in Kenya. As we get ready to kick-start our interviews, people continue approaching the shops to make their purchases: kids buy sweets and parents stock up on basic essentials.
Since roughly 80% of retail sales across Kenya, and more generally sub-Saharan Africa, take place in traditional outlets (such as these kiosks), our mission today is to gain a better insight into the day-to-day operations of these outlets, as well as the key challenges they face.
Who are the kiosk owners?
After carrying out in-depth interviews with three kiosk-owners in Kawangware, we got a better insight regarding who these kiosks owners actually are.
Gilbert Hamis is 33 year old man. He has been running his business in solitary for 13 years, right from the moment he finished his studies.
Ann Barasa is 29 years old. She co-owns and runs this kiosk alongside her husband. They started their business 2 years ago when Ann was finding it difficult to maintain her job as a cleaner in Upper Hill (a high-end neighbourhood in Nairobi). Her husband still works in Upper Hill as customer care for a middle-sized telecom company. Due to their busy schedule, they take it in turns to do work for the kiosk. On a normal day, he opens the shop early before going to work, around 6am. After waking up the family and doing some house chores, she takes charge of the kiosk during the day, until her husband returns from work. Together, they close the shop at 7pm, and retreat to the room at the back of the shop which they call home. On top of this, twice a week, Ann in charge of going to the wholesaler to restock their shop. However, when they’re in need of heavy items, her husband is called upon for help.
Francis Makwassa is a 41 year old man. He was born and raised in this neighbourhood, where he met his wife. Together, they now own two kiosks in the area; his wife runs one of them and he runs the other. Fifteen years ago Francis used to work for a tour company, and then as a taxi driver. However, he felt those jobs consumed too much of his time, with him often having to spend long nights working to make good money. Francis says him and his wife are very happy with the operation of their businesses. However, this doesn’t stop them from having high hopes for the future. Having identified an opportunity in the market, they are planning on converting his wife’s kiosk into a beauty parlour. Similarly, Francis is hoping to save up enough money to buy a small van and be able to cut out the middleman in the distribution system, which he says demand too high a cut.
What do customers buy?
In these sprawling and bustling communities, families are often short on cash. This means they tend to buy what is most affordable at the time, what is cheapest, the basics: sugar, flour, rice, milk and bread. Unfortunately, the profit margins here are not very high, normally around 5%. This makes volume and customer retention a critical factor for business success.
For Ann, sugar is currently the most profitable product. She buys a kilo for 77 KSh (0.76$) and sells it at 85 KSh (0.84$). Despite a 10% profit margin, she assures us that the profit is highly variable, and thus unreliable. Customers complain that, in two subsequent months, they can pay vastly different prices for the same products. However, this issue is completely out of Ann’s control. Fluctuations in prices are driven by sudden changes in international and national trading policies, as well as environmental shocks, such as drought. When prices are high, not only are her customers unhappy, but they are also unable to afford her products. For this reason, Ann sometimes finds herself in situations where, to retain business, she is forced to give her clients products on credit. For Ann, as well as for all the other interviewed outlets, keeping track of customer debts posed significant challenges.
Integrating AI technologies, as discussed in our article on Ethical AI in Africa, could help traditional businesses optimize operations and reduce inefficiencies.
How do kiosk owners manage their recording keeping?
So, if keeping track of debts causes issues for shopkeepers, how do they handle other data related activities?
Although when we asked about their businesses’ overall profitability, none of the kiosks had an itemised breakdown of their costs, revenues or profits, previous training carried out by Technoserve — an organisation that promotes business solutions to poverty –had taught these shopkeepers to manually keep a record of daily costs and revenues.
This method allows them to keep record of their balance. However, it makes it difficult to identify trends in their business activities or calculate their overall business profitability.
Similarly, stock levels can not be tracked automatically and thus Gilbert’s shop often suffers from unexpected shortages of stock.
Despite this issue, which from the outside seems like a significant source of inefficiency, Gilbert and all the other shopkeepers expressed positivity regarding their business.
Francis, for example, declared monthly profits of around 30,000 to 40,000 KSh (296–397$).
Whereas Gilbert and Ann, both of whom owned significantly smaller shops in narrow side streets, said they made around 10,000 and 20,000 KSh monthly (99–199$).
So, now we know a bit more about how well kiosk owners are doing, when can we learn about their operating model?
Keep a look out for part 2 of this series which will explore how these kiosk owners organise their operations, with a specific focus on how they manage their cashflow and stock.
Francis Makwassa “Monday to Saturday, everything I earn, I reinvest in the business to buy more stock. However, on Sundays, I keep the money to myself. On average on Sundays I earn 15,000 KSh, this makes me around 60,000 KSh monthly. However, I have to pay rent, which in this case is 15,000 KSh, so this leaves me around 40,000 KSh a month to spend on myself and my family”.
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