Forget the bottom of the pyramid; the money is now in the middle

A young man roasting maize for sale along Kenyatta Avenue against the mural of Nelson Mandela. Money has left the bottom of the pyramid. Photo by XN Iraki

Malls are designed for both shopping and entertainment. The mall designers ensure you spend as much time and as much money as possible there. When you get tired of shopping, you can rest but still spend money in restaurants or one of the many entertainment points that factor in children.

Those complaining that Nairobi has too many malls are missing the point; these big buildings are designed for the future. Note that most urban centres, including Nairobi, have no sports grounds or parks; shopping including window shopping have become the newest form of entertainment in Kenya. That is likely to be more pronounced in future.  

For the academics, malls are our labs; we observe people’s behaviour and make predictions about their decisions. The activities and the movement of the masses in malls are not random, there are patterns. Artificial intelligence is making that easier by analysing masses of data from sales, credit card use and even from social media.

My most recent visit to one of the newest malls in Nairobi, The Two Rivers, left me convinced that money is no longer at the bottom of the pyramid as popularised by management scholar CK Prahalad in his 2004 book 'The Fortune at the Bottom of the Pyramid'. The fortune is now somewhere in the middle. The almost impractical penetration of 30 per cent or more of the target market at the bottom of the pyramid has been overlooked as noted by Erik Simanis in 'Reality Check at the Bottom the Pyramid' published in Harvard Business Review in 2012.

One clothes shop in the mall, LC Waikiki, was parked with buyers. The prices were in the “middle” not too low, not too high. There was a long queue as customers bought their clothes. I was also on the queue. The high-end shops across the aisle were not that packed.

Why would the middle replace the bottom of the pyramid as the new source of money for businesses? It is simple logic. Once you price your goods or services in the mid-range, you get customers from three socio-economic groups, the middle, the upper and the lower classes.

The higher class has no qualms going down a bit. It may remind them of where they came from. The upper class is lonely, there are too few people in that class and looking for company downstream is in order. The lower class will buy middle class goods and services because they aspire to be there. That is why fake labels do well among the lower classes. That is also why most malls in Nairobi have a pedestrians’ gate.

We argue persuasively that the novelty of the mall is that it tries to bring all the three classes together to spend money, not interact. The race, tribe or beliefs don’t matter — I observed that from the queue at Waikiki. The name sounds Hawaiian but the firm seems to have French and Turkish origins.

The middle does not hold the fortune only in the malls. Here are a few examples where middle matters, and it's dollars. One of the most popular and successful cars is Toyota RAV4.  It focused on the middle of the car market, between the sedan and the big SUVs. Like the attire clothes shop, the lower, middle and upper classes all drive RAV4. Its success was easily imitated by Nissan XTrail, Mitsubishi Outlander, Hyundai Santa Fe, Honda CRV, Ford Escape and many others.

What of residential estates? The high-end estates like Runda or Muthaiga are out of reach for the hoi polloi. But the middle class estates are popular and rarely have empty houses. Think of Imara Daima, Buru Buru, South C, South B or Ngumo. The upper class can move back to the middle if their fortunes fade. They can also invest in these houses. As the lower class graduate economically, they easily make it to middle class estates creating a vibrant market. Ever wondered why developers rarely build one bed roomed apartments while two bed roomed houses are more popular than three or four bed roomed?

In education, the money is in the middle level colleges. Yet that is the sector we have neglected. Kenya’s education is unique in focusing too much on lower level (primary) and higher level, the degrees. We even promote middle level colleges into universities, while ideally we should build new universities.

The strength of education in USA is not in Ivy League universities like Harvard but the middle level colleges, called community colleges. They produce the skills that run the economy from plumbers to electricians, bricklayers and firefighters. Ambitious community college graduates easily transfer to universities. Lots of Kenyans in the USA use that route to reduce the cost of education. Community colleges are more affordable though most universities and colleges charge out of state fees often double what natives pay.

Some have argued that even on social matters, we prefer to be in the middle. We look for friends in the middle in terms of height or even IQ. That applies to marriage mates too. The "middleness" affects women more than men. Highly educated women find it hard to get marriage partners, with men preferring the middle. Teachers and nurses are popular as wives to both the upper class and the middle class. Unfortunately, men rarely marry up, while women easily transcend socio-economic classes — a big advantage.

Truthfully, middle is not always positive. The middle ages, the period from the fall of the Western Roman Empire to Renaissance or from around 5th to 15th century AD or CE for Common Era is regarded as a time of uninterrupted ignorance, superstition, and social oppression, says Encyclopaedia Britannica. What of middle management that takes the heat from the top managers including the board of directors and the lower levels of the firm.

The mid-life crisis is characterised by turbulence for both men and women as we transit from youthful age to old age. We miss the golden age when we were young and energetic and fear the coming old age. We can’t forget showing the middle finger too…