How to Start / Open A Bodaboda Spare Parts Retail Business in Kenya

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This survey focuses on the retail of motorcycle spare parts those in the bodaboda business. It contains some few notes on the wholesale aspect of the business.

Growth, decline or policies affecting the bodaboda sector will affect the business in one way or another.

As of December 2013 there was an estimated 800,000 registered motorcycles. In 2005 there were 3,759. Then in 2008 the government zero rated motorcycles below 250cc in 2008 and in 2009 the number jumped to 91,151 motorcycles.

Between January and September 2013 there were 109,153 new motorcycle registrations. This was about 35,000 more than the number registered over a similar period in 2012.

The trend is expected to continue in 2014. Though in some locations the bodaboda trade is considered saturated, the number of people getting into the business will continue to increase, given that it’s fairly simple to start.

Second hand motor cycles go for as little as Kshs.30,000 while new models start from as low as Kshs.60,000 There are also traders, politicians, banks and microfinance institutions availing finance to youth groups for purchase of motorcycles .

A large percentage of riders also don’t bother looking for driving licenses.

Other Positive Indicators

Honda Motor Company has set up a local assembly line with a capacity of 25,000 units per year, and which started operating in December 2013.

Car and General which had been importing and distributing TVS motorcycles from India, and Suzuki parts from Japan set up an assembly factory in Nakuru with a capacity of 70,000 units.

In December 2013 Toyota Kenya introduced a scheme called Crux Finance which enables more motorcycle riders to own motorcycles by pooling in resources. Toyota through its Yamaha division provides the motorcycles which are then paid for through a daily remittance of Kshs.300.

Negative Policy trends

Many county authorities are trying to formulate ways to regulate the bodaboda business. This is by increased taxes, zoning which restricts operators to certain areas only and hours of operation.

For example towards the end of February 2014 police in Nairobi ordered bodaboda riders to operate until 8pm so as to curb growing insecurity. The inspector general on his part aims to limit operations of the bodaboda to between 6am and 6pm. Nothing came out of the order.

In 2015 the county government banned bodaboda operators from Nairobi CBD. Still nothing much came out of the ban.

Since 2014 the National Transport and Safety Authority (NTSA) has tried to implement regulations governing the operations of bodaboda. This in terms of skills of riders, amount of cargo they can carry, registration and conditions of the motorcycles. Again nothing much has come out of these efforts.

If policies such as the above are strictly implemented then the annual growth of the bodaboda sector will reduce in the short and medium term (6 months to 1 year) from the present average of about 25% but stabilize in the long run after the initial shocks. However since bodaboda are more about convenience no matter the policies the public will continue using them.

On the other hand bodaboda operators have become numerous, and with enough political and lobbying power of their own. With the elections set for 2017, there will be less efforts to try control the business and more to grow them so as that politicians can win their favour. No drastic changes in operations are expected until after the 2017 elections.

Motorcycle Parts Tax

In August 2013 the government declared that it would increase tax on motorcycle parts from 15% to 25 %, same as that of complete motorcycles. Only parts manufactured within East Africa were to be exempt. This was an East African Community policy aimed at encouraging the use of locally manufactured parts by motorcycle assemblers in the country.

In September the ministry of East Africa Cooperation lobbied and the implementation of tax was postponed for a not very well defined time. The argument among manufactures assembling locally was that locally made parts are of low quality.

When the tax comes into force the cost of parts will slightly go up, but not to an extent that will make the business of motorcycle spare parts unattractive. One because the high number of motorcycles on the road will still need to be serviced. Two because the tax policy won’t affect the cost of whole motorcycle units. Keeping everything constant the price of locally assembled motorcycles will likely go up while that of imported motorcycles will remain the same.

Capital, Process and Stock

Stock

Before you stock you need to gather some very particular insights about the location.

First is to identify the most common types of motorcycles in the area. Generally the two major classes are what those in the business call CGs which means Chinese Generation, and Indian models. Chinese models include Skygo, Yamahana, Flyboy, Tiger and Keweseki among others while Indian common models include Focin, Boxer, Hero, TVS and some others. There are also Japanese models like Suzuki, Kawasaki and Yamaha Mate.

Though there are many spare parts that are universal such as spokes, bulbs, break fluids, roller chains, tires, break switch, tubes, stand springs and the like most parts are made specifically for particular brands.

Outside Nairobi there tends to be a dominating model/brand. For example Nyeri has moved towards Focin. Kisumu used to be dominated by Yamaha though that has changed to Chinese models. In some towns you will find bodabodas plying a particular route largely being of one brand. A little further in Uganda they don’t trust Chinese models and the Indian motorcycles dominate, a taste which for sometime had been transferred to Western Kenyan though Chinese models have now made headway.

Brand choice is largely a function of the dealers, and the influence of early adopters. The local trends are not permanent and can change depending on what is pushed to the market. However the leading brand in a particular market say at this moment will be in circulation for about 2 years because of a vibrant second hand bodaboda market.

In Nairobi there are a high number of bodaboda operators and thus most brands are well represented. However if setting up in an estate it’s important to confirm if any particular brand is dominating.

Information about which brands are popular in a certain area can be gotten from local mechanics or riders. There is no market that is dominated 100% by one brand. Knowing the leading brand helps one stock intelligently especially if with limited capital.

Secondly it’s important to know which brands of parts are trusted or popular in the particular area, for example Yog, MSR, Avon, Railin and more. To be clear these are not motorcycle brands rather the brands of particular parts like clutches, brakes, tires and so forth.

Again trusting particular spare parts brands is a consequence of the influence of early adopters, and the leading wholesalers and retailers. The trust is less about price and say quality rather what could be referred as ‘culture/loyalty” in an area. Even if the preferred model is of low quality customers will ask for it simply because that is what that market has confidence in. This kind of information can be acquired from riders, and mechanics.

There is a debate in the market about which models between the Chinese and Indian are better. One side has it that Indian bodaboda models break down more often. Parts which originate from India are more affordable but a section of the market maintains they are of relatively poor quality, last for a shorter duration as compared to the Chinese.

There have been cases where shops selling low priced Indian parts have been accused by customers of selling fake parts. Such a reputation drives away customers.

On the other side are those who say Chinese parts and brands are expensive. However compared to Indian models there are relatively fewer complaints about quality.

With enough capital one can stock a variety of the major brands; otherwise a potential retailer can use the market information to stock shrewdly so as to avoid tying capital in dead stock.

See Revenue for fast moving items, Suppliers, wholesale and retail prices of some of the items.

Licenses

The County Government business permit is the only license required to run a motorcycle spares shop. The cost varies from county to county but averages between Kshs.3, 000 to Kshs.10, 000 depending on size, and particular location within the county.

Capital

There are motorcycle parts shops which have been started with a capital of Kshs.100, 000, while others have had as much as 2 million invested for a retail and wholesale operation.

But to get a better idea let’s break it down

 

Item

 

Breakdown

 

 

Total

 

 

 

 

 

 

 

(Kshs.)

 

 

 

Licenses

 

 

 

 

 

 

 

 

 

 

 

 

County Single Business Permit

 

1

 

 

10,000

 

 

Sub Total

 

 

 

 

10,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock

 

Various

 

 

150,000

 

 

 

 

 

 

 

 

 

 

 

Premises

 

 

 

 

 

 

 

 

 

 

 

 

 

Shelves and Renovation and Branding

 

All

 

 

16,000

 

 

Rent

 

2 months deposit + 1

 

24,000

 

 

 

 

month rent. Will depend

 

 

 

 

 

 

on location. (@

 

 

 

 

 

 

 

Kshs.8,000 per month)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sub Total

 

 

40,000

 

 

 

 

 

Working Capital

 

 

 

 

 

Salary

 

3 months @ Kshs.7000

21,000

 

 

per month for one worker

 

Other ( Transport, electricity etc)

 

3 months @ Kshs.2500

7,500

 

 

per month

 

Sub Total

 

 

28,500

 

 

 

 

 

 

Grand Total ( Adding all the above sub totals)

 

228,500

The above is just capital guideline. There could be adjustments. For instance if you are paying lower rent, you start with more stock or have few or more renovations to make.

An ideal minimum capital would be about Kshs.300, 000. This is enough to purchase a variety of the most crucial and fast moving parts. And still leave you with money to keep the business running before it picks up. More about stock will become clear in Revenue below.

A shop in a location with relatively high competition can take longer to break even, and it’s wise to have working capital. At least to pay rent and continually buy parts that are in high demand.

Revenue

Before looking at the Revenue trends here are the average wholesale and retail prices of some items. As stated above there are various brands of the products, say Avon, Yog, MTR and many more. The prices vary depending on the source, strength, popularity and perceived quality of the brand.

Revenue Scenarios & Sample Wholesale and Retail Prices

The prices below are for a shop located in a Nakuru residential. The owner sources about 30 % from Yog Motorcycles in Nairobi, 10% from wholesalers in Nakuru and 60% from suppliers in Uganda.

 

Item

Wholesale Price (Kshs.)

Retail (Kshs.)

 

 

Spark Plugs

32

 

100

 

 

 

Brake shoe

96

 

200

 

 

 

Piston rings

100

 

400

 

 

 

Bulb

30

 

100

 

 

 

Tubes

210

 

350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Engine Valve

89

300

Clutch Plates

107

350

D/Switches

357

800

Break Springs

10

50

Full Gasket

107

600

Now here are the prices for the same items for a shop located in a relatively small town in Kirinyaga. There are four other motorcycle spare parts shops in the area serving about 130 motorcycles. The owner sources 100 % from a wholesaler in Embu town.

Item

Wholesale Price (Kshs.)

Retail (Kshs.)

Spark Plugs

45

70

Brake shoe

105

150

Piston rings

90

210

Bulb

30

80

Tubes

240

300

Engine Valve

100

250

Clutch Plates

120

260

D/Switches

400

600

Break Springs

10

50

Full Gasket

150

400

And here are prices for a small shop motorcycle shop somewhere in Kahawa, Nairobi. The shop is located in an area with about 60 motorcycles. The owner sources from wholesalers along River Road and Industrial Area, Nairobi.

Item

Wholesale Price

Retail Price

Battery

1950

2300

Brakes

750

1000

Mudguard

190

360

Petrol tank lock

900

1150

Backlight Screw

450

600

24 teeth gear alloy steel

550

750

Revenue Averages

 

Average Margins

 

30%

 

 

 

Margin Range

 

15% - 400%

 

 

 

Average Daily Revenue

 

4600

 

 

 

Lowest Daily Revenue Recorded

 

900

 

 

 

Highest Daily Revenue Recorded

 

39,330

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Bodaboda Monthly Spend on

Kshs.1250

Maintenance

 

Average Daily Bodaboda Income ( Urban

Kshs.1100.

Center)

 

Average Daily Bodaboda Income ( Rural)

Kshs.600

The average daily Revenue is for county and divisional headquarters. And could appropriately apply to any urban area where there is one retail shop for every 85 motorcycles.

Retail prices are determined by what is prevailing in the particular market. Margins are not fixed and in some cases could be as high as 400 %. Margins are largely determined by source of supplies, competition and how efficient the business is. Retailers who source from Uganda enjoy relatively higher margins even after factoring in cost of transport.

Fast Moving Items

Among the fastest moving items are:

-Tires

-Tubes

-Rims

-Side Mirrors

-Break Shoes

-Indicator Lamps

-Spark Plugs

-Front & Rear Sprockets

-Engine oil

-Cables

-Return Springs

-Head Cases

-Dimmer Switches

-Side Mirror Holders

On average a bodaboda will replace a tire every 5 months. Five months can seem long until you consider that every month there will be many bodaboda(s) joining the trade, so every day it will be five months for a substantial number of operators. Depending on the infrastructure and driving habits of individual riders the rate can be higher.

Though generally the most popular items are same across most of the country, there could be small differences for instance based on the terrain, driving culture, authorities, most common brands, customer economic and social activities.

Terrain and customer activity affect the wear and tear of the motorcycles. Bodabodas plying market routes are likely to carry relatively heavier loads meaning shocks and rims will be replaced more often.

If the roads are rough then it means there will be more damages to various parts. Same happens in areas where as a culture riders are careless.

There are motorcycles brands which wear out faster than others or have problematic parts which have to be replaced more often.

Also if the authorities are strict then owners will aim at keeping their bodaboda in a good condition which means they will invest more in maintenance.

Break Even Point

The breakeven point averages 4 months. This will be a function of the marketing effort, margins, and the competition in the area.

How Customers Make Purchases

For parts like tires, mirrors, rims and even shock absorbers bodaboda riders are able to see or feel when they need replacement. In such a case they purchase the items then take to the mechanics to fit. Some riders have developed basic maintenance skills and are able to fix parts like tires or mirrors.

For more technical breakdowns riders take the motorcycles to mechanics for diagnosis. If the mechanic tells a rider to buy this or that part a big percentage of riders will prefer to go purchase the part themselves then give the mechanic to fix. Sometimes if unsure a rider will ask a mechanic to accompany him to a parts shop.

There exists suspicion among riders that if mechanics purchases parts on their behalf they will hike the price, or go for lower quality items. On the other hand some riders trust the mechanic to identify fake and genuine products and get the right part at the right price.

Some mechanics will recommend particular retailers based on their relationship, prices and quality. Therefore it’s a plus to develop good working relationships with mechanics.

Revenue, Margins and hence Profit is influenced by:

Supplier

The variation in prices between different wholesalers could be as much as 200% depending on their capacity, competition in the area, how they judge the customer, their sources and even how they navigate customs. Upcountry wholesalers are more expensive as compared to those in Nairobi.

The only way to get the best deal is to move from one wholesaler to other comparing prices. Often there will be room for negotiations and quantity discounts.

It’s important to know the prevailing retail prices within the area you wish to operate from. This way you are able to gauge whether the prices being offered by the particular wholesaler are favorable. A rule of the thumb is to add 20 % to the wholesale price to get a rough idea of what you will sell the item.

In Nairobi the highest concentration of wholesalers is located along Luthuli Avenue, adjacent parts of River Road, Nyamakima, Kirinyaga Road and Industrial Area. Some wholesalers specialize for instance in Indian motorcycles while others only handle Chinese parts.

There are many counterfeit products in the market. Usually these imitate well known parts brands like MTR, Raicillin, and YOG among others. Counterfeit products are of lower quality and don’t last long, and quickly earn a retail shop a bad reputation.

It might be a little tricky for those new in the business and even for some of the old hands to identify the fake products. The best protection against fake products is to purchase from reputable wholesalers. For instance buying Yog products from the Yog specialist along Luthuli Avenue a retailer will be assured of genuine. (See Supplier list below)

With time retailers are able to identify the wholesalers offering the best deals and genuine products. However it’s recommended to occasionally shop around in case a cheaper wholesaler comes into town.

There are increasingly more retailers who are sourcing from Uganda and Dubai. Depending on where one is located the prices could be good enough to offer wholesale prices.

Uganda

The Uganda bodaboda market is matured as compared to the Kenyan market which is about 10 years old proper. This means motorcycle spare parts dealers in Uganda have gathered enough knowledge and experiences to help develop supply efficiencies and relationships which enable them to source more competitively.

Nonetheless what makes Uganda even more competitive are the relatively lower taxes charged by the Ugandan government which enables parts dealers to offer lower prices. Differences with average Kenyan prices range between 10% & 200% depending on the product and the wholesaler in Kampala.

Price advantages in Uganda must also be considered in terms of related expenses such as travel, accommodation, and possible custom charges at the border. A round trip to Kampala from Nairobi will average Kshs. 5,000, while standard accommodation starts from Kshs.1000.

A guide may be necessary during the maiden trip. This is because some of the Ugandan traders take advantage of clueless Kenyans to inflate prices so that in the end the extra margin is not worth the cost in money and time spent to travel. An alternative to hiring a guide is to spend more time shopping around or purchase from reputable traders who are unlikely to raise prices.

When travelling by bus customs is more or less sorted and you pay an average of Kshs.500 for luggage. When in a private car custom checks are more thorough and taxes higher.

However after the first initial purchases many retailers develop relationships with trustworthy traders so that they don’t have to travel, rather they make payment by Mpesa and the

wholesaler in Kampala packages and sends the parts to Kenya by bus or courier services as agreed. This saves on time and money.

Dubai

Importing from Dubai gives higher margins of 60% to 400% more, a percentage big enough to become a wholesaler. Yet it costs more to source personally from Dubai so the quantities must be big enough to cover the costs. A round trip air ticket to Dubai costs an average of Kshs.50, 000 and there will also be custom taxes to pay.

Some of the traders have found tricks to avoid paying taxes. This is commonly by using particular courier services. There are also Kenyans in Dubai who source and send to Kenya thus saving on transportation costs and time. Dubai prices are considered friendly as compared to China. Also traders in Dubai are more flexible in terms of quantities, and a retailer/wholesaler does not necessarily have to purchase a container full. A capital of about Kshs.1, 000,000 would be enough.

More Notes

Many of the retailers in the market have started by purchasing locally, getting a taste of the business, then expanding to Uganda and Dubai.

As a retailer it’s important to identify a wholesaler in your neighborhood where you can dash to buy parts quickly and resell to customers. This is because stock runs out unevenly and before you order from Uganda or Nairobi you need to keep satisfying the customers even if purchasing locally reduces your margins. Riders who can’t afford to be off the road will move to your competitor and if the rival offers a better deal or even reliability they defect permanently.

Wholesalers

There are many wholesalers all over but here is a list of a few reputable ones to start you of:

 

Supplier

Location

Minimum Initial Purchase

 

 

Yog Motorcycles

Nairobi, Luthuli Avenue

Kshs.30,000

 

 

 

Kampala

 

 

 

 

 

 

 

 

There are many fake Yog

 

 

 

 

 

products in the market, so it’s

 

 

 

 

 

good to be cautious if you are

 

 

 

 

 

not purchasing from trusted

 

 

 

 

 

suppliers.

 

 

J & L

Kampala Nabugabo Rd. Gate

If physically present in

 

 

 

No.1, Shop No. N10 N11

Uganda, the minimum

 

 

 

Ggawala Shawuliyako

purchase is Kshs.20, 000. If

 

 

 

Nairobi

 

purchasing by M-pesa/bank

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

transfer and so that the goods

 

 

 

 

 

are sent to a location in Kenya

 

 

 

 

 

the minimum is Kshs.50, 000.

 

 

 

 

 

You have also to pay for

 

 

 

 

 

transport charges.

 

 

 

 

 

The minimum purchase

 

 

 

 

 

quantities for wholesale in

 

 

 

 

 

Nairobi are Kshs.30, 000.

 

 

 

 

 

These amounts are not fixed.

 

 

 

 

 

And after the initial purchase

 

 

 

 

 

and the wholesaler recognizes

 

 

 

 

 

you then you can make far

 

 

 

 

 

much less purchases at

 

 

 

 

 

wholesale, where you restock

 

 

 

 

 

particular items as need be.

 

 

 

 

 

The margins in Uganda are

 

 

 

 

 

good enough to help you sell

 

 

 

 

 

the parts in wholesale to

 

 

 

 

 

smaller shops that source

 

 

 

 

 

locally. Some retailers join

 

 

 

 

 

hands and contribute a small

 

 

 

 

 

amount say Kshs.15, 000

 

 

 

 

 

each, then purchase in bulk in

 

 

 

 

 

Uganda or locally. This way

 

 

 

 

 

they enjoy greater discounts

 

 

 

 

 

and lower prices even with

 

 

 

 

 

lower capital.

 

 

Renevox Agencies

Renevox Agencies

At least Kshs.20,000. If you

 

 

 

Othaya / KIrinyaga Road -

also intend to sell in

 

 

 

Pasonic Hotel Mwea

wholesale, Renevox can offer

 

 

 

Opposite Equity Bank,

you appropriate prices.

 

 

 

Nairobi, Kenya.

 

 

 

 

 

Renovex Agencies near

 

 

 

 

 

Nyayo Stadium, Foton

 

 

 

 

 

Trucks Building, Uhuru

 

 

 

 

 

Highway.

 

 

 

 

 

 

 

 

 

 

 

Samawati Traders

Jeizen House

No exact minimum. Initially 5

 

 

 

Luthuli/ River Road Junction

pieces and above could earn

 

 

 

0727 119536

a retailer a wholesale price.

 

 

 

 

 

They also offer quantity

 

 

 

 

 

discounts

 

 

Others

In every major town there are

The minimum varies.

 

 

 

a number of major

Upcountry the minimum

 

 

 

wholesalers. For instance

amount is on the low and can

 

 

 

Rem G in Kisii, Adventure

be as little as Kshs.5000

 

 

 

Technology in Kisumu,

 

 

 

 

 

Nakuru, Kisii, Issa Adam

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Embu . In Nairobi there are several wholesalers along River Road, on the section from Accra Road headed to Ronald Ngara Street. Also around the junction of River Road and Luthuli avenue.

Foot Traffic, Location & Pricing

The average spending by a bodaboda rider is more or less the same within the same location. This means that this is a business which thrives on high foot traffic. Anything that leads to an increase in the foot traffic will lead to more sales all other factors like price and quality being kept constant. A convenient and easily accessible location thus increases revenue.

Depending on the location accessibility could be in relation to the garage or in relation to the area of operation. For instance bodaboda operators within Nairobi CBD and within a radius of about 6 kilometers of CBD prefer to purchase parts within the CBD. However since fixing within the CBD is relative expensive and not easily available they opt to fit in garages within the estates they come from.

Away from Nairobi shops located above 10 kilometers from major towns charge the highest prices. This has less to do with the cost of transport or anything, rather it’s because more or less the bodaboda rider is cornered. Even if the rider knows he can get the part cheaper in the main town he will calculate the cost in terms of time, and possible loss of revenue and opt to purchase from the local shop. This is common especially for low priced goods.

On the other hand if the local shop gives an impression of expensive, for instance by selling common items at a price twice or thrice higher that of the bigger town, customers will keep off unless when absolutely necessary.

For instance a shop in the Kahawa Wendani area there is only one retailer serving about 120 motorcycles. Daily Revenue of the shop averages Kshs.1300 per day which is about 70% below shops serving a similar number in the city. The lower sales are largely because operators think his prices are higher as compared to more established shops in Githurai, Ngara area and Nairobi CBD, five to ten kilometers away, and where bus fare ranges from between Kshs.10 and Kshs.30 during off peak hours.

At a local level it’s important to balance between convenience and competitive prices.

Mechanics & Marketing

Marketing efforts aimed at making the bodaboda defect from where they purchase presently have an impact on revenue. Since in most areas bodaboda operate from a common pool, winning a few riders will help spread word to the rest.

A very effective strategy used by some spare parts shop is to position a mechanic outside the shop. The mechanic can be independent or an employee of the shop owner. In the latter case the owner can direct the mechanic to do minor maintenance work free of charge, but only if a rider has purchased a part from his shop. Many riders appreciate the free service.

Often mechanics tend to have a faithful customer base. Thus when they move to a different area, their customers move with them too. Because of this some shop owners ‘poach’ mechanics from nearby areas to come work next to their shops. Shop owners give incentives of cash, rent free space, profit sharing or other terms favorable enough to make the mechanic defect. The assumption is that the mechanic will recommend the shop and the riders will become faithful customers. Having a mechanic outside your shop whether affiliated to you or not is one of the best ways to capture customers and increase sales.

Retailers who are able to form positive relationships with mechanics record higher sale since mechanics still carry a lot of weight in purchase parts purchase decisions.

Competition

The price a retailer sells a spare part will be determined by the level of competition in the area. Where the competition is little, there is more room to decide what price to charge than where it’s intense.

In centers where competition is growing but not yet so strong the unwritten rule is to charge what is agreed as the market price, this is usually what the local market leader charges.

Where competition is intense there is little room to charge above market rates. Sometimes in smaller markets with moderate competition retailers collude to fix prices.

A business which has sourced relatively cheaply but sells at the same prices as the rest competition makes more revenue and is able to grow faster than rivals.

Location and Return Policy

Though there are advantages in locating immediately next to a motorcycle garage, any shop within a favorable radius does not suffer any disadvantages since riders more often than not shop around.

The major advantage of locating near a garage is the ability to effectively implement a return policy for some items. Sometimes when riders are purchasing parts they are not sure whether they will fit or not, and they want a sort of guarantee that if the item does not fit they can comfortably come for an exchange. For a new entrant such a policy is easier to implement if it’s within an area where the back and forth is convenient.

A return policy helps increase customers. Still if done without care then it can lead to losses as riders and mechanics take advantage to exchange products with fakes or faulty ones. Others can damage the product while fitting or mess with it to an extent it becomes unusable. It’s important to insist if the item has to be returned then it has to be in such a condition that it can be resold.

In some other areas there are no bodaboda ‘garages’, rather maintenance is done by mobile mechanics . In this case bodaboda riders call a local mechanic as need be. Other mechanics set up near bodaboda pick up and drop off points.

Variety

Revenue is higher among retailers with a wider variety. The obvious reason is that they are able to make more sales by serving a wider range of customers. Variety can be in terms of different parts or in terms of brands. In terms of parts it means the dealer has every possible part a motorcycle requires, while brand could mean having a few items but a wider variety of brands say like Focin, TVS, and Suzuki. Though parts are generic they are in such a way that they correspond to certain brands or country of origin say China or India. So revenue will be more if the shop is able to satisfy the brands existing in that market, and then have a wide variety of various parts.

Random Observations on Revenue

Some products come in sets and fetch higher returns when sold pieces rather than in full. For instance gasket kits.

Efficient management of costs such as rent, staff, and transport will have a positive impact on revenue.

Reaching out to the bodabodas rather than waiting for them to walk in helps increase revenue.

New products functional or fancy also excite the market. Since the bodaboda market is highly competitive any new product that will help the bodaboda look different, attractive, save costs or become more efficient will be received well.

Competition & Survival

Competition Figures

 

Nairobi

County

Divisional

Estates

 

CBD

Headquarters

Headquarters

 

No of motorcycle

143

18

8

5

spare parts

 

 

 

 

shops

 

 

 

 

No of shops that

27%

33%

44%

56%

have opened up

 

 

 

 

in the last 1 year

 

 

 

 

No of shops that

10%

14 %

16%

14%

have shut down

 

 

 

 

in the last 1 year

 

 

 

 

-Base period: March 2015. Sample shops in Rift Valley, Central, Nyanza, Western, and Eastern & Nairobi provinces.

-No of shops that have closed is higher in the small centers where the market can’t sustain more than a few shops

Random Observations

-Along Nairobi’s Luthuli Avenue and River Road in the 2013/2014 period there are more shops that are recorded to have shifted from selling other wares; electronics, electrical items, and mobile phones to motorcycle parts

-The percentage of motorcycle parts businesses for sale is low as compared to other businesses. This data is derived from advertisements in newspaper classifieds, online forums and business brokers.

Status of Competition

Competition in the business is increasing. This is largely driven by the many entrepreneurs seeking to cash on the rising number of bodaboda in almost every location throughout the country.

Basically all that one needs to start the motorcycle parts business is capital, identification of suppliers and skill to understand and sell the parts. The latter is easily acquired even by those with no background in bodaboda or mechanics. There is also a number big enough of people

who can be hired to sell. The low barriers to entry and perceived attractiveness of the business mean that there are more investors willing to get into it.

The relative ease in terms of low quantity thresholds and regulation with which entrepreneurs with the right amount of capital can import parts from Dubai or even Uganda has spurred growth and competition in the wholesale side of the business.

To attract more retailers some wholesalers have become very flexible in terms of the minimum quantities a trader can purchase so as to enjoy wholesale prices. This makes it possible to start the motor cycle business with relatively low capital.

Ease of movement within East Africa and particularly Uganda where a passport is no longer needed implies that many Kenyans will try taking advantage of perceived prices differences between the two countries to start relevant businesses, the motorcycle spare parts being one of those.

Opportunities & Survival

From the figures above, there is a marked difference between the businesses opening than closing. Also a high number of the shops have opened up in the last 2 years. This shows the market is expanding fast but is yet to get saturated. Opportunities thus exist in the business.

Though opportunities are present survival in this market depends on the particular local conditions.

In most markets there are no retailers with roots deep enough to an extent that they can’t be dislodged from any market leadership position. As noted in Revenue there is a lot of price based competition, and a retailer who is able to compete on basis of price will be seen to have an edge in the market. However such an edge is usually not strong enough since with the right sources and related factors like service anyone can equal him.

The lack of any strongly rooted retailers means that any new player with the correct strategy has a chance of penetrating and surviving in the market.

That said opportunities have to be considered hand in hand with the size of the local market. In upcountry locations a ratio of 1 retail shop to 47 motorcycles is enough to make the business break even. This if a retailer is able to source relatively cheaply, sells at higher comparative prices and keep costs such as rent low.

Businesses can survive on a lower motorcycle numbers but growth is stifled.

In towns outside Nairobi, at the wholesale level, there are usually shops controlling more than a proportionate share of the market. This is tied to the capital they are able to invest, their sources of supplies, and hence the prices and variety they are able to offer. In upcountry towns nay county and former district headquarters there is usually an average of two major

wholesalers who are trusted by retailers on basis of price and quality. In Nairobi CBD most retailers also sell wholesale to upcountry customers.

Critical Success Factors

Assuming that all the retailers in a location understand the market proper and have stocked the products in demand in the particular locality, and then the Critical Success Factors in the business are price, and then quality.

Even if the business is operating from the most prime of locations but the price is above average as compared to rivals within the same locality then the consumers will opt for lower priced competitors within the same area. The primary goal of bodaboda riders is profits. Thus they will aim to keep their costs down so as to maximize profit.

Low price is relative. A retailer in Nakuru can sell an item that costs Kshs.100 in Nairobi for Kshs.140, but still be considered low compared to another shop within the locality selling the same item at Kshs.150.

Price is also tied to source of supplies. If one is able to source cheaply but still sell at the same price as other players in the market then he will enjoy higher margins and increase his possibility of expanding faster.

High quality parts last longer compared to low quality. Quality often has to do with whether the product is counterfeit or not.

A business selling parts at relatively low prices (low price in terms of the market he is operating from) is more likely to survive and flourish in the market than one selling at higher prices. A mix of a fair price and high quality offers the best chance of success in the business.

What Is Competition Based On?

Competition in the business is based on price, quality, variety, location, marketing and customer service.

Price

When making purchase bodaboda operators customers first ask “Do you have this and this?” If the answer is positive the next question is “What is the price?” Alternatively they ask “How much are you selling brake pads?” If the price is fairer than say the competition or within his budget then they starts discussing variety and quality.

In markets where there is more than one retailer, it is common for each to try setting the price at the lowest possible. The price depends on the margin the retailer wants to enjoy, his source of items, efficiency and popularity. (See more in Revenue).

Bodaboda operators operate from central places. That means they share a lot of information. It’s easy to acquire a reputation as a fair or high price shop. High price reputations take time to erase.

In locations where there is only one retailer she can survive even while charging high prices, sometimes even double the buying price because the consumers don’t know or have no quick alternative.

Quality

Quality is largely attached to the long term savings in cost. A high quality product is expected to last longer and therefore save on maintenance costs. Quality products are also thought to enhance performance.

Like with other automotive parts some of the original quality products are copied and duplicated by rivals , thus the market is awash with counterfeit products ‘pretending’ to be originals.

Quality will depend on the source of items, a good knowledge of what is available in the market and the skill to identify what is fake or not. The latter might be a challenge for those who haven’t owned or maintained a motorcycle or with the technical knowledge to identify such. The easiest solution is to purchase from a reputable supplier. An alternative is to enlist the services of a mechanic or other professional in the market

With time customers, from their experiences, acquire a bank of information on who sells original quality items and counterfeits. This information is shared freely. A retailer who sells counterfeits claiming they are original is quickly shamed.

At times consumers don’t mind paying extra for higher quality original items.

Variety

There are retailers who compete by trying to have as a wide variety of products in terms of brands, pricing and every possible motorcycle part. This gives them an edge in terms of the ability to make more sales even of items not often purchased. A wide range of products also helps such a retailer cater for clients with varying budgets.

Variety could be either through investing more capital or sourcing intelligently. The latter means budget any amount of money so as to maximize stock. More capital means than an entrepreneur can comfortably invest in a wide range of products without worrying about dead stock.

Marketing

Some retailers are more aggressive than others in the efforts they make to try reach consumers. While many set up and wait for consumers to walk in, others try to form working, commission based relationships with mechanics. There are also those who have recruited champions among bodaboda operators. The champion indirectly promotes a particular shop and gets a

retainer or some other form of reward such as subsidized prices. Other marketing efforts include free service posters, leaflets and billboards.

Location

A location is judged in terms of accessibility, convenience and the number of possible customers in the area.

Ideal locations are those near garages or service centers. This offer a pool enough of ready customers looking for parts.

Economies of location are also used in location considerations where a retailer sets up in an area already known for motorcycle spare parts. Though rent in such a location can be higher it offers advantages in that customers already identify it with the parts and thus minimal marketing will be required. But since in such an area competition is intense a lot more effort will be needed to stand out.

Customer Service

Customer service is aimed at getting repeat customers. At least once every month a motorcycle owner does a repair, and if the other factors such as price, quality and location are favorable customer service helps capture and maintain existing customers. This involves basic like politeness, friendly banter, suggestions and offering alternatives, packaging.

Specialization

Some traders chose to specialize in one brand or category of motorcycles. Thus in an area with both Chinese and Indian motorcycles a retailer can opt to specialize in either or even particular brands. Ideally this is an effective way to penetrate the market. This strategy works if there is a number of the said brand big enough to sustain the business. However the danger is what happens in the long term if the brand stops being favorable or popular in an area.

Consumer Behavior

At least 36% of the bodabodas on the road are not owned by the people riding them; rather the riders are employees who have gotten into some sort of contract with the owner. The contracts often are of the nature that the rider remits a certain fixed amount everyday to the owner. The rider takes care of minor everyday maintenance, and if it’s something major then the owner has

to come in. This means there is a strong incentive to keep costs as low as possible so as to meet targets and maximize returns.

The bodaboda rider also wants to keep his motorbike on the road as long as possible. He doesn’t want to spend too much time in the garage. Thus as mentioned he will be keen on price and quality. Price doesn’t necessary mean the lowest amount but value for money. There are many bodaboda riders who are ready to pay a premium price for quality.

Choice of where to buy parts is first and foremost influenced by colleagues, and then by mechanics. Other than price and quality customer want a variety of products fitting different price levels and quality so that they are able to chose depending on their budgets.

Customers also appreciate skilled shop attendants who understand the products they are selling. Such people are able to give suggestions or even advice on better products or ways of solving technical problems. This as compared to a person who only knows the parts and the prices but does not understand how they work.

Basic customer service is also appreciated. This includes politeness, a warm character, speedy service and the ability to relate with the customers.

A guarantee of sorts about the products is also appreciated. This is not necessary an outright warranty or return policy but also the kind of guarantee captured in such statements “If it doesn’t work come ask me”

Quoting the price of a part so that there is room for negotiation also attracts customers. When the price is fixed though low customers feel as if the retailer is unfriendly as far as price is concerned.

Manpower

Average no of Employees

2

Average Education of Employees

KCSE

Average Salary of Employees

Kshs.8000

Labor Turnover

7 Months

Among motorcycle shop owners the major consideration when recruiting is a good understanding of spare parts on the part of the candidate. In many cases the employees learn the fine details on the job.

Recruitment is mainly by word of mouth, among friends, family and even bodaboda riders. It is common to recruit employees with low skills then train them.

Employees with personal interest in mechanics, vehicles or technology are preferred since they learn faster and are able to make technical suggestions to customers.

There are many times when customers want the honest opinion of the shop attendant, and if he or she is not skilled he cannot give a useful opinion.

Where the owner is not present daily, trust and honesty are important. Though it’s possible to track sales and money through regular and impromptu stock taking, it’s hectic, and if a worker has to leave suddenly there may be not enough time to check whether there is any missing cash or parts. Stock cards and receipts can help in tracking stock and cash but they are not fool proof. Honest and trust are better.

In places where competition is intense it’s common for employees to act as brokers. If a shop hasn’t stocked a particular part the employee volunteers to go source it from a nearby wholesaler or a competing shop, and then come sell it at a higher price, he keeps the profit. Though there is nothing particularly wrong with that, and it gives employees an extra income if done without control it can make the employee focus more on the side deals rather than the shop. Some crooked employees can tell customers and offer to go source them so as to resell to their own advantage.

There are no standards guiding salaries of shop employees, and often they arrived at by negotiation.

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