How to Start / Open A Second Hand Novels Business in Kenya

Second Hand Novels Business Plan (Kenya)



Overview

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This quick guide refers to the business of selling second hand novels, general interest and children books informally and semi formally. Informally on the streets and semi formally in market structures. The business does not include proper textbooks as used in schools or sold in bookshops.

The business targets the mass market with books selling at an average of Kshs.100 irrespective of the title and quality. However the price often ranges between Kshs. 50 to Kshs.300.

There are two main groups of second hand novels dealers in Nairobi. Permanent Stand and Hawkers who are on the move. Nowadays the permanent second hand book sellers are found almost on every street while hawkers may pop in anywhere, sell and disappear as soon as necessary.

However the number of ‘on the move hawkers’ selling novels has reduced when compared to 2012. This is because of the relative bulk of second hand books which does not allow quick escape when the county askari strikes. Again compared to other ‘hawker’ items books do not move as fast and are not as profitable. There are now only a handful of hawkers specializing in books.

How It Works

The chain from the first owner to the consumer in Kenya can take any of these two forms:

First Book Owner – Charity Shop - Exporter - Importer – Wholesaler – Retailer – Kenyan Consumer

First Book Owner – Charity Shop - Exporter - Importer – Retailer – Kenyan Consumer

Most second hand novels sold in Kenya are largely imported from Europe with UK being a favorite. There are some from the US too. The importers are independent second hand good dealers. Some are general wholesalers who import books among other things while others specialize in books.

Second hand books as sold in Kenya are first collected by charity organizations either directly or through donations at charity shops. The charity shops will sell the donated books but more often the find themselves with more books than they can offload to walk in consumers buying a few books each. Sometimes they want to sell the books in bulk so as to quickly raise money for some cause.

That is where second hand book exporters come in; they buy books by the tonne from the charity shops, sort, pack and export to different countries. Among the common classifications of the books are : children’s; coffee table; mass market paperback, mixed books and premium mass market where customers specify which authors they are looking for.

Once sorted the books are then packaged in pallets, then 20ft or 40 ft containers.

Sample Exporter Prices

As of October 2015 the prices for a 20 ft container by one of the well known second hand book wholesaler in the UK who also sells to some dealers in Kenya were as follows:

Category

Approximate no of Books

Cost (£ - GBP)

Children’s Books

38-40,000

3995

 

 

 

Mass Market Paperback

20-25,000

2395

Books

 

 

Mixed Books

15-20,000

1795

Taking the example of mass market paper backs the cost of a container is £2395 GBP, which is about Kshs.368830, assuming a rate of Kshs. 154 for 1 GBP. The cost of shipping a twenty foot container from the UK varies but will average £1000 GBP, which is about Kshs.154, 000.

Books do not attract import duty and VAT. However there is an Import Declaration Fees (IDF) of 2.25% of cost (CIF). So in this case you will pay about Kshs.11763. There will be other costs such transport from Mombasa, clearing agents etc. These could add up to Kshs. 50,000. So by the time the book gets to your store you will have spent Kshs. 584,593.

If the container has a minimum of 20,000 books, and you divide into bales of 100 books each then you will have 200 bales. Selling each bale at Kshs. 5000, you will have revenue of Kshs.100, 000 and a gross profit of 415, 407. If the container has a maximum of 25,000 books then those will be 250 bales. With each bale going at Kshs. 5000 then you rake Kshs.1, 250,000 and gross profit Kshs.665407.

Ordering second hand books is not rocket science. You can do it online via the renowned second hand book exporters in the UK. These include http://www.wholesaleusedbooks.co.uk and World of Books: http://www.usedwholesalebooks.co.uk

When a container arrives in Kenya, the local importer will either sell to mitumba wholesalers, who then sell to retailers, or sell directly to retailers. The retailers then get the bales and sell to consumers.

This is the general picture but there could be variations. For example one importer gets the books in a container, and then gives selection priority to a few retailers, who help in sorting the books by genre, or how fast a book is likely to sell. He also packs books in small bales of an average of 40 books.

Some retailers also practice the same kind of discrimination, whereby on opening a bale they get in touch with a few consumers or resellers who pick the cream of the books. The cream is

usually well known authors such as John Grisham, Jeffrey Archer, Jackie Collins and other best sellers. For this privilege the book seller charges a premium.

The reseller will buy such a book in good condition say at Kshs. 150, and then sell at between Kshs. 300 and Kshs. 450 either in a different part of the town or in the estates. Sometimes when the seller is lucky to land a good bale then the revenue from the crème is enough to cover the costs of the whole bale, and everything else is profit.

The remaining books are sold at one price, say Kshs.100, to members of the public. ( More under “ Revenue”)

Licenses

Most street vendors in Nairobi operate using a hawker’s license particularly the Newspaper and

Booksellers vending license.

The license costs Kshs.2400 per year. It can be acquired at the County Government offices at City Annex or county government offices distributed in the sub counties Of course there is the possibility of bureaucracy and bribes but it’s possible to get the license as long as it’s within an a permitted location. With the license you can sell books and newspapers on the streets.

Though a license is of help the reality of the street is that you have to pay occasional bribes and handouts to the county askari on the ground, some plain clothes policemen and depending on the location street ‘owners’.

Outside Nairobi the dynamics are more or less the same. Though each and every county will have licensing specific or zone areas for particular businesses.

Starting Process

Identify location

Acquire License

Establish supplier (s)

Get books

Start selling

Learn the ropes

Suppliers

You can purchase books from suppliers located in Nairobi CBD or Gikomba. Suppliers in the CBD include:

Abreban Traders, who are found at Kilome House, Kilome road: – This is one of the oldest second hand book importers in Nairobi. If you are able to build a good relationship with him then, every time he imports he will give you priority to select the best of books as you help him sort. This gives you access to books that are likely to move faster. You can reach them on 0714 824507

There is another importer at the Universal College building, along Tom Mboya... Use the back route facing Heltz driving school. Ask the watchman for the people who sell second hand books in bales.

Other dealers are found in Gikomba. You could ask those selling books in retail, many will direct you to a wholesaler. Try building relationships with the importers so that you are able to get the camera equivalent of books.

Revenue and Margins

Average Daily Revenue

Kshs. 3300

Highest Daily Revenue recoded

Kshs. 9300

Lowest Revenue recorded

Kshs. 350

Average Mark Up

30 %

Imported books are sold in bales though they don’t necessarily arrive in the country in form of bales. On average a bale of adult novels usually has 100 books, while that of children titles has 120 books. The price of such a bale ranges from Ksh.3000 – Ksh.7500, with an average of Kshs.5000. The exact price will depend on the supplier.

A trader like Abreban also packs in smaller bales containing 40 to 50 books, and each going for between Kshs. 1000 and Kshs.1500 depending on possibly how fast the books in a bale can sell.

Quality in this business implies how fast a book can sell. This largely depends on the author, genre and the condition.

Depending on the supplier one may only have vague idea of the quality of the books inside. Though theoretically every book has a possible reader there are books which sell faster because they are already a household name. Obviously better returns will be gained if the books move faster and the stock is replenished.

If you purchase a bale of 100 books @ Kshs.5, 000 and sell each book at Kshs.100 then the gross profit will be Kshs.5, 000. If you purchase a bale @ Kshs.3500 and sell at Kshs.100 then the gross profit will be Kshs. 6500. If you sell @ Kshs. 50, then your gross profit will be Kshs. 1,500.

Also if you purchase a bale of 40 books @ Kshs. 1500 means that each book is costing you Kshs. 37.50. If you sell them at Kshs.100 each then you make Kshs. 2500 in gross profits, if you sell at Kshs. 50 you make a gross profit of Kshs. 500

It’s important to note that it’s not always possible to sell all the titles within the same day. This means that if you have a bale of 100, and you sell 50 books then you could need to restock so as to continue offering a wider variety.

The way it actually works on the ground if you are in a relatively high traffic area then within two or three days of opening a bale of books the best of the books will be bought. You will remain with titles which although good sell at a slower pace.

It is at this point that some booksellers restock. Others will reduce the price. For instance if they were initially selling the books at Kshs.100 they reduce to Kshs.50 so as to clear the slow moving books and restock. This means in a bale of 100 books, 60 could be sold @ Kshs.100, and 40 @ Kshs.50. Giving a total of Kshs.8000( 60 x Kshs.100 + 40 x Kshs.50) . Thus if you had bought the bale @ Kshs.5000 you will make a gross profit of Kshs. 3000. The ratio of fast moving and slow moving books is not fixed.

Like we mentioned there are times when a reseller could purchase from a retailer the cream of the books at a premium which could range between Kshs. 150 and Kshs. 200. The arrangement is that before the retailer start selling the bales to everyone he contacts the reseller who comes and selects the best of books. For this privilege he pays Kshs. 50 to Kshs.100 extra per book . If such books are of a considerable number it means that they are able to cover the cost of the buying the bale, and the rest is now profit.

Competition in the business has been increasing and this has exerted pressure on the revenue. There are now more book sellers situated at all corners of the town. This means that unlike before when readers knew of very particular book sellers where they could go purchase, they now can buy a book from any corner.

Pricing

Pricing is aimed at making sure the books sell as fast as possible while maximizing returns. Most of the street booksellers are targeting the mass market. They want to be able to move as many books as possible so they fix a price that will be so attractive when compared to any other alternative be it street or bookshop.

In Nairobi the most common price is Kshs.100 but as the number of book seller’s increase they are more instances of Kshs. 50.

Factors Influencing Price:

Competition – Where competition is intense then some sellers will reduce the price to the lowest possible. It is important to note that the lowest prices do not always translate to higher sales. Even if a book is priced at Kshs. 50 and the customer does not like that kind of book then she will not purchase. But if you price at Kshs. 50 and you have a collection of ‘good’ books then she will purchase several instead of say one.

If you have a collection of good books then the lowest price is not the necessarily the best option rather the next best price.

Collection and Variety – If a seller feels he has a good collection then he will go for the average or higher price. A good collection could mean several of best selling or well known authors. Some of the sellers set aside books by well known authors and price them higher. For instance they could take books by Stephen King or Jeffrey Archer and price them at Kshs. 250 when they are selling books by other authors at Kshs. 100.

Supplier –If you purchase a bale at Kshs. 5000, Kshs.3000 or Kshs.7500 then it will influence the price at which you sell the books.

The most common price is Kshs.100, other common price points are Kshs. 50 and Kshs. 200. A standard price of Kshs.100 is good enough

Revenue just like pricing will be affected by:

Location

Price

Supplier

Competition

Competition & Survival

Base (July, 2015, Nairobi )

Competition Figures

No of second hand book sellers in Nairobi CBD – 134 (Includes sellers at Wakulima market, Nyayo market, Kenya Poly Railway Bridge, Hawkers)

No of book sellers that have opened in the last one year – 31

No that have closed within 1 year – 11(This figure is for the permanent stands only since it’s not wholly possible to monitor the hawkers. Point of note only 2 of these are in CBD proper, the rest are in Ngara, Wakulima. Also some of these may not have exactly closed but relocated)

Some of the Reasons given for closing are:

-Shift to Textbooks and Revision Papers

-Other profitable (non book) alternatives

-City Council Harassment

-Reducing margins

Random Observations

-The number of second hand book sellers in Nairobi CBD has been increasing.

-There has been a gradual shift towards revision books and papers

-There are now more newspaper vendors getting into the second hand book selling business. Most start with children books.

-Mass second hand books sellers are establishing in the estates and in towns outside Nairobi though not yet in a major way. There have been second novel booksellers in the estates and almost every major town. However there haven’t been sellers doing focusing on the mass market; selling all kinds of novels at standard prices of say Kshs. 50 or Kshs.100.

What to Make Of the Figures

The fact that more than 38 % of the businesses opened within the last one year means the market is expanding very fast. Competition in the business is growing at a high rate but the market is yet to get saturated. Partially that’s what makes the business attractive; there is still room.

Supply side dynamics have also driven the growth of the business. There are now more importers bringing in second hand books motivated by attractive margins and demand. The suppliers push the books to the retailers.

The fact that a large number of businesses have operated for over a year shows the market is big enough to accommodate them profitably.

Barriers to Entry

The barriers to entry to this business are minimal. With Ksh.10, 000 one can start the business. The biggest barrier especially within central business districts or major towns is finding a good high traffic location. And such a space that won’t get you harassed by county officials.

Distribution of Competition

In Nairobi there are no dominating players. The sellers are distributed all over the town and none seems to have more than proportionate control of the market. That said there are sellers who specialize in certain kind of books say cookery or science fiction books. These could be said to be dominating in those particular genres.

By virtue of their location some booksellers move more books within a shorter time and thus replenish constantly. This could make them a favorite with some loyal readers, giving the impression of dominance.

But Book buying is a matter of taste. A book seller who will dominate will be one with the widest variety of books and a visible high traffic location.

Outside Nairobi and in peri-urban areas where there are only a few booksellers, sometimes two or three, then one of them emerges as dominating largely by the strength of the size of their stock.

There is room for a new entrant in the business as long as they are in a strategic location and have a reasonable variety. Novel purchasing is such that if you enter the market with a good variety, and in a good location then customers will come.

This is the kind of business that thrives in highly populated locations with a threshold of diverse and literate readers. Think of Nairobi, county headquarters and equivalent towns. Though there could be readers in smaller rural and peri urban towns, the numbers might not be big enough to sustain the business.

Critical Success Factors

Location

A good location for novels as noted is one with high traffic, visible and with a diverse literate population. This in an urban kind of business.

A Note on Location in Nairobi

Street book vendors operate on pavements. Ideally the pavements belong to the owner or tenant of the building but they are treated as public space. Hawkers and vendors will sometimes set up at any location.

A good working relationship would involve you talking to the caretaker or owner of the building then agreeing on the space. Property owners are reluctant to offer their space. Hawkers sometime will set up without the authority of the owner. There might be some pull and push. Some spaces are however open to anyone who understands the dynamics of the location.

You can identify space, try negotiate with the owner or sometimes the watchman and see what possibilities are there regarding the space.

Outside street spaces you can look for formal spaces. Remember selling second hand novels is a high traffic business. You need to be in a place with as high and diverse foot traffic as possible. That is the biggest advantage of being on the street and in an urban center. If you will be in a room or say a stall in town make it easily accessible and advertise so that book lovers can pop in.

Novel buying has a big element of impulse. And when choosing a location, think of that.

Variety

A wide variety of books will mean that as many of the customer’s tastes are catered for. This way you will sell more. Book tastes are so diverse and with a limited variety only a handful of customers will be satisfied. This is irrespective of whether you are targeting the general market or just a particular genre. For instance if you are only selling science fiction books you could have different authors and titles of the books. In smaller towns it’s risky to specialize in one genre .

Specialization requires a location with a high population so as to have enough of consumers interested in a genre.

Sometimes variety will mean volume, A bale with 100 books will have about 80 different books, because at times there will be two or three titles of the same book. Thus to have a wide variety then a retailer will need to buy more bales.

Good Pricing Pricing intelligently so that you make sales and not end up with dead stock.

Reliable Supplier - A good relationship with a supplier that helps you get first access to the best of books once the arrive in Kenya.

On what is competition based on:

Differentiation is minimal. Serendipity and impulse plays a big role in purchase of books. Still competition is based on:

Specialization

Focusing on only a particular genre so as to differentiate from the other sellers. Specialization is a basic form of branding. In a high traffic area specializing in one genre if could be disadvantageous. In a way it’s like leaving money on the table because consumers passing by your location and interested in books but not that particular genre will look and move on to the

next vendor. So you can have a bias towards a particular genre but at least have a sprinkling of other books.

Specialization helps win loyal customers of a particular genre. If you are known as the supplier of Science Fiction books for instance then you will have a constant loyal customer base. But what happens when there are no science fiction books? Supply side reasons sometimes make it a little hard to specialize, and thus the need to have a little of all.

Other points of competition which are explained in Revenue and Critical Success Factors are:

Location

Variety

Price

Consumer Behavior

The general view in the country is that Kenyans don’t read beyond the text books that are a necessity in schools. However though on average Kenyans read less than other countries say in Europe , Nigeria or even South Africa there is still a big enough number of Kenyans who are reading for pleasure to sustain a standard novel selling business.

Consumers can be classified as

Intense readers

Average readers

Impulse readers

Low end / wannabe readers

Intense readers purchase 5 to 20 books or even more books at a go. They will ask for the seller’s contacts so that they are updated when there is a new batch of books. Their interest is not just well known to others but any good book popular, literary or otherwise. Sometimes they move around town looking for good books. But in most cases they will be loyal to one or two booksellers.

Though price is an important consideration it comes second to a good selection. If you are able to get a few of these, get their contacts and alert them when you are bringing a new batch. They will be loyal and help you clear your stock faster.

Average readers form the majority, and will purchase 1 to 5 books. They are the majority of consumers... Though they don’t purchase many books at a go they are the kind of people who will not pass a good book.

Again book buying is a very impulse exercise, and so much about discovery. Consumers will come find books on the street; authors they know or have never heard of and start digging for

something that could be of interest to them. This means that you are likely to sell more if you make it easy for the consumers to browse and dig through the pile looking for different titles.

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