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Buying in bulk: Why you’ve been sold a lie

FINANCIAL STANDARD
By Graham Kajilwa | October 26th 2021

Pricing affects aisle traffic which is determined by consumers’ shopping behaviour. [Courtesy]

The ordinary shopper expects to pay less whenever they buy a product in large quantities compared to buying smaller portions of the same item.

It is the basic thinking behind buying in bulk or wholesale.

For example, it should cost you less for a 5kg bag of rice compared with buying the same in portions of 1kg.

But if you are keen enough, you would have noticed that you end up paying more every time you buy items in bulk.

A spot check by Financial Standard in several supermarkets found out that maize flour and sugar are some of the products whose pricing does not add up when bought in bulk as opposed to buying in smaller units.  

For instance, while a 1kg packet of Soko maize meal goes for Sh54 at Cleanshelf’s Rongai branch, a 2kg packet of the same brand costs Sh107, while a 5kg one goes for Sh270.

This means that if you go for a 2kg packet of the brand, you would save Sh1 compared to buying two 1kg packets whose cost comes to Sh108.

But if you buy the 5kg packet at Sh270, you would spend Sh2 more.

Maize flour and sugar are some of the products whose pricing does not add up. [Courtesy]

Conversely, if you opt for two 2kg packets and a 1kg packet, you will make a saving of Sh2, as the total cost comes to Sh268.

This goes to show that there is no value in buying in bulk going by the cost of the 5kg packet that goes for Sh270.

The same case applies to the Pembe brand of maize flour, with a 5kg packet going for Sh285, a Sh15 difference compared with Soko.  

The trend is replicated across the prices of other items, such as tissue paper.

For example, a pack of four (Hannan) tissue rolls will cost you Sh147. But if you bought four single rolls of the same brand at Sh34 each, it would set you back Sh136, an Sh11 saving compared with the price of the four-roll pack.

On the other hand, a two-roll pack goes for Sh75, which is Sh7 more expensive compared with buying two single rolls at Sh68. A spot check at Naivas Supermarket Rongai branch also reveals that at Sh555, a 5kg packet of sugar costs Sh30 more compared with buying smaller units of 1kg at Sh105 per kilo.

And at Sh210 for a 2kg packet of sugar, one would not make any saving compared to the one who buys two 1kg packets. 

The Retail Trade Association of Kenya (Retrak) Chief Executive Wambui Mbarire explained the phenomenon, saying pricing can be based on a retailer’s pricing matrix or on the recommended retail price.

“The manufacturer could send you goods with a recommended retail price or it can be based on an individual retailer’s pricing matrix,” said Ms Mbarire.

Retail Trade Association of Kenya (Retrak) Chief Executive Wambui Mbarire. [Wilberforce Okwiri, Standard]

This phenomenon could subtly explain why the “kadogo” economy - where households purchase small amounts of products that meet their daily needs - thrives in the country as documented in a 2014 survey by Nielsen, information, data and market measurement firm.

“Similar to other African countries studied, affordability remains a key driver for Kenyans. Companies can use smaller pack sizes to make products more affordable,” reads the survey findings in part.

It was based on responses from 5,000 respondents across Nigeria, Ethiopia, Uganda, Kenya, Zambia and the Democratic Republic of Congo.

The survey found out that there is an opportunity for companies to leverage functional parameters like price.

“Additionally, more expensive and value-adding products may fare better with a larger base of affluent consumers in Kenya than in other African countries,” said the survey report.

Former Tuskys Supermarkets Chief Executive Dan Githua, who now runs his own retail e-commerce outfit Anko Retail, said apart from the recommended retail price, retailers also consider competition and their profit margins when pricing their products.

“That is where the difference comes in because different retailers will load a different margin,” said Mr Githua.

He said pricing also affects aisle traffic, which is determined by consumers’ shopping behaviour.

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