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Why dukas are still king despite the rise and rise of supermarkets

FINANCIAL STANDARD
By Esther Dianah | Jan 25th 2022 | 3 min read
By Esther Dianah | January 25th 2022
FINANCIAL STANDARD

Sarah Macharia at her shop in Umoja, Nairobi County. [Elvis Ogina, Standard]

It is January, the toughest month of the year for many Kenyans after the excesses of the festive season.

And it is times like this that make you appreciate your local shopkeeper more than ever.

It is not unusual to see even those accustomed to shopping in bulk at trendy supermarkets making a beeline for their local shop to stock up on some items, probably on credit.

Such is the importance of the tiny corner shops in many residential areas, especially in urban centres.   

They have stood the test of time, outliving erstwhile big retail chains such as Nakumatt and Uchumi that have since collapsed under a mountain of debt.

In 2018, the Kenya National Bureau of Statistics reported that shops and merchants extended more credit than any other entities in the country.

According to the statistician, 28.2 per cent of total credit extended in the country was done by the two.

This is compared to commercial banks at 8.8 per cent, behind self-help groups (19.4 per cent), relatives, friends and neighbours (14 per cent), and Saccos (11.2 per cent).

Shopkeepers provide a last-mile distribution point for hard-to-reach markets, selling goods on flexible terms, including offering goods on credit to low-income households with precarious incomes.  

Many Kenyan families - about 4.7 per cent - buy their foodstuff from supermarkets compared to 26.6 per cent who buy from general shops, kiosks (22 per cent) and informal sources (10.2 per cent).

Nathaniel Kamau, who owns a wholesale and retail shop in Ngobit, Laikipia County, speaking to our sister publication, The Nairobian, said small traders like shopkeepers as well as their customers know the benefits of buying and selling on credit.

"People’s disposable incomes have reduced. I used to sell a 90kg sack of sugar in a day. Now it takes a week, or even more. People no longer buy as much as they used to,” he said, lamenting that Covid-19 had wreaked havoc across society, leaving a large number of people unable to afford basic consumer goods.

It is not unusual to see even those accustomed to shopping in bulk at trendy supermarkets making a beeline for their local shop. [Courtesy]

“Those that sustain these shops are not the very rich. It is those who are seen to be at the bottom of the food chain,” said Kamau.

Davis Toto, a shop owner in Buruburu Phase I, said the survival of dukas, as they are popularly known among Kenyans, depends on the ever-rising demand for fast-moving goods.

“A shop must always have fast-moving products like milk and flour. Milk is the least profitable product with a profit margin of only Sh2 per packet, but being a fast-moving product, it drives up the bottom line at the end of the day,” says Toto.

He said the relatively low capital needed to start a shop has also contributed to their proliferation.

Toto started out with a capital of Sh60,000. Edith Musira, who has been a shopkeeper in Nairobi for more than 20 years, said the fact that many shopkeepers offer credit to their customers keeps them coming back.

“These customers bring us money every day, so once in a while, we give them credit when they are down. We can’t turn them down,” she said. 

Patrick Wameyo, a personal finance expert who is the founder and lead consultant at Financial Academy and Technologies, said credit extended by shopkeepers is significant for customers, and shrinking it would have a big effect on society.

“Business credit is offered as a tool of expanding sales while commercial lending is purely for profit,” said Wameyo.

Much as a shopkeeper will make a profit in selling the goods whether in cash or on credit, interests that the banks will charge will be significantly higher than the profit a businessman makes from selling to his customers.

“Most businesses survive on credit. Shopkeepers allowing you to take goods on credit is literally the shopkeeper lending you money,” Wameyo said. 

Elizabeth Irungu, a business development manager at ICEA Asset Management, said dukas are still popular because they serve an underserved market.

“What makes them popular is the structure of the economy. We are a developing country because the majority of people survive on a very low income,” she said.

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