How to Start / Open A Cosmetics Retail Business in Kenya

The Cosmetics Retail Business Plan (Kenya)



Overview

Download The Cosmetics Retail Business Plan - Kenya PDF➥

This quick guide focuses on the retail of beauty and personal care products commonly referred to as cosmetics.

Value of Kenya Cosmetics Industry

The Kenyan Cosmetics industry is estimated to be valued at least Kshs.100 billion (2016). This is the value of cosmetics goods sold and distributed in the country. The value is the accepted estimate quoted by the Kenya Association of Manufactures, Kenya National Bureau of Statistics (KNBS), and even multinationals such as L’Oreal and P&G. In 2011 KPMG, a consultancy, estimated the value to be Kshs. 20 billion.

The exact value of the industry is not known. This is because of the high number of cosmetics traders operating informally: from those illegally importing products to backyard manufacturers who are not documented. Thus the value could exceed Kshs. 100 billion.

Positive Trends Since 2008

Flame Tree Group acquisition of Suzie B, (a local niche cosmetics line ) in 2016

Flame Tree Group acquisition of Beauty Plus Trading East Africa brands such as Miss Africa and Black Angel (2014)

Tiger Brands purchasing 51% of Haco Industries in 2008. Haco is a leading local cosmetics manufacturer and distributor. (They divorced in 2017 due to management realignment not poor sales.)

Nakumatt partnering with Revlon in an investment worth about Kshs100 million.

Nakumatt investing in the cosmetics section. They sell an average of 37,000 units annually valued around 40million.

L’Oreal purchasing Interconsumer Products. This resulted in the former selling an average of 40m units of different products.

Increase in indigenous cosmetics brands.

Proctor and Gamble targeting the mass market (2015).

Increase in training on cosmetics making.

No of traders selling small scale cosmetics items has increased.

Small and large scale independent importers of cosmetics products have increased.

Middle class expansion and with it socially conscious woman with money to spend.

Increase in the number of career women.

Social competition and pressure.

Social exposure.

High end international brands establishing a formal local presence. These include Mac, Black Opal, Essie Nails, Estee Launder and more.

Studies by Consumer Insight, since 2013, which show that the Kenyan woman prioritizes spending on cosmetics before saving, paying rent or even paying school fees.

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Negative Trends

Rising inflation rate which is decreasing the disposable income of consumers. In April 2017 the inflation rate was 11.48%; March 2017 it was 10.28%.

Slow economic growth

A Note on Cosmetics Manufacturers

Other than retail you can join the Kenya cosmetics industry at two other major levels:

Cosmetics manufacturers can be grouped into large, medium and small depending on their market size.

Among the large manufacturers are the multinationals with a local presence. The local presence of the manufactures is through manufacturing and distribution channels established from scratch or by acquiring stakes in indigenous companies.

The biggest acquisition of an indigenous company by a multinational has been the Kshs.3 billion purchase of Interconsumer Products, who owned the Nice & Lovely brands, by L’Oreal of France in 2012. L’Oreal was targeting the Kenyan mass market and Interconsumer’s established distribution systems.

Other significant deals by multinationals with local companies have been the 51% purchase of Haco Industries by Tiger products from South Africa. This marriage has since been broken. Godrej Consumer Products from India also acquired 51% of Style Industries the manufacturer of Darling brand of hair products.

PZ Cussons East Africa limited, Beirsdof East Africa, and Unilever Kenya limited are some of the other large multinationals

Then there are the medium size manufacturers, most of them indigenous. They make a variety of skin and hair products. A number of these companies have turnovers in hundreds of millions.

Whereas some of the medium sized manufacturers have well known products, others operate below the radar with no particular product standing out but nevertheless selling big numbers. These include Triclover Industries, Uzuri, Alison Products, and Nightrose Cosmetics among others.

In this group are also large scale importers bringing in a variety of cosmetic products.

Lastly are the small manufactures that are working or struggling to get a share of the market. The more successful of them are competing with the medium and large manufacturers for shelf space in the supermarkets.

By our research since 2011 there has been a surge in the number of entrepreneurs interested and actually making cosmetics products. Part of the interest was triggered by the much publicized acquisition of the cosmetics division of Interconsumer Products by L’Oreal. The small and backyard beginnings of Paul Kinuthia, Interconsumer Products founder, have enticed many to try start their own cosmetics lines hoping to replicate his magic.

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The new crop of small cosmetics manufacturers can be grouped into: professional

manufacturers with some capital to buy equipment, hire professionals and do some branding. And ‘bathroom’ manufactures who mix chemicals in their houses to make products like hair shampoos, lotions and soaps.

Of the professional group some are niche targeting a very high end market with exclusive cosmetics lines like Suzie B and IMAHA which can cost as much as Kshs.30,000. The rest, who are the majority, aim for the mass market. These include the many no name products and also the likes of Tony Airo and Melrose Bounty and Brown and. There are also some entrepreneurs contracting companies in China and even locally to manufacture and package cosmetics.

Ideally to start a cosmetics line the first thing that is needed is the formula to make the product. Now in the market are products made from original formulas, products made by cloning the formulas of popular brands, products made what we could call mass formulas, common knowledge formulas that are open to everyone.

Original formulas require some skill and research to come up with. A trained cosmetologist, dermatologist or other such professional could be involved. For instance, coming up with a lotion that is suitable for dark skin. Or identifying a ‘beauty’ problem particular to people in a certain region or suffering from a certain condition like glycerin allergies.

An original formula is supposed to make a product stand out in the market and this by solving an existing problem or performing better than what is in the market already. Original formulas require more resources in terms of time and cash to develop. Research to identify opportunities and gaps in the market are needed, then the resources to develop the product.

Still some of the original formulas in the market developed by innovative small scale manufactures are based on a good understanding of consumer experiences. For example by observing that some women mix Product A with Product B so as to get a desired effect. So you come up with product C which is more or less a mix of A and B. This might not sound so original but it creatively solves a problem and consumers respond favorably.

The formulas for clones are sometimes acquired by reading the ingredients as written on product labels and then by trial and error experimenting until one gets as close as possible to the original. Rumor also has it that some crooked employees working for cosmetics companies leak and sell the formulas of well known brands

.

The internet is full of all manner of cosmetics formulas; some free and others for sale. There are also cosmetologists selling their services and who can be hired to come up with original products. Moreover there is a lot of freely available material on the internet that you can read and come up with basic cosmetics formulas without having a background in chemicals, medicine or related disciplines.

Locally there has been an increase in the number of companies training people on how to make various cosmetics. The trainings involve making cosmetics using the open formulas or clone formulas. Some of the trainers will advertise their services thus: “Come learn how to make XYZ” where xyz is a well known international brand.

There are many cosmetics products in the market which are not differentiated at all in terms of formula composition; the difference is in the Branding. In such a case success depends on how

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the product is positioned, how much goes to marketing, advertising and establishment of distribution systems.

Depending on the formula or what you are making you can then do it manually ; usually involving mixing and boiling in drums and buckets , use jua kali machines that are now sold in Kariobangi Light Industries, import specialist equipment from Europe, China or India, or outsource the manufacturing to local or Chinese manufacturers.

Before you get your product on the shelves you need to have the cosmetics approved by Kenya Bureau of Standards (KEBS) among other things.

In brief to start manufacturing your own line of cosmetics either for a niche or mass market you need:

A formula: original, generic, standard or any other.

A production unit – which could be manual, semi manual, automated or contracted

KEBS certification. KEBS certifies your cosmetics products are not made using banned substances

Meet other requirements to help you get into shelve spaces of supermarkets and cosmetics retailers. ( Think eye catching packaging, barcodes, company registration, VAT and the like)

Distribution and marketing system.

Of note is that the Kenya Industrial Research and Development Institute (KIRDI) offers training and incubation services for small and startup cosmetic manufactures. This means for a relatively small fee ( it ranges but Kshs.30,000 and thereabouts depending on exactly what you want) they can train you how to make cosmetics, provide their facilities for packaging, help you in certification and branding, but you have to invest in sales and distribution. This could be a good way to start. KIRDI headquarters are along Popo Road, South C, Nairobi and they have offices in various parts of the country.

Essentially cosmetics products manufactured the jua kali way could give margins of between 30

%and 150 %, that is if you get people to purchase your products. (See index for a sample cost analysis from one of the trainers)

Distribution and marketing is a big challenge for many of the small manufactures now that the cosmetics industry is more competitive than ever. Getting supermarket shelf space is at times hectic, and major wholesalers are sometimes reluctant to stock your new products. There is also a lot of foul play and arm twisting in the cosmetics distribution chain.

Remember without certification, great packaging and show of capacity supermarkets will not stock your products.

Despite the challenges some of the small manufacturers are gaining ground by persistence, innovation in products, distribution and marketing. The latter is partially by selling directly to consumers, having product ambassadors in salons and other social setting, focusing on small supermarkets and aggressive marketing.

Let us now go back to the retail of cosmetics.

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Licenses

The licenses required for a cosmetic retail shop are:

Single Business Permit – This is issued to all business operating within the county. The exact price will depend on the size of the premises and the county. Budget at least Kshs. 10,000. The figure could be as high as Kshs. 30,000 if the premises are big. This license is acquired from respective county offices.

Outdoor Advertising License – This is to allow you to have a signboard advertising your business or have some sort of wall branding. The exacts will depend on the size of the signboard. Fees vary from county to county. At least budget Kshs. 10,000. Fees could be as low as Kshs. 3000 for a small signboard.

Fire License – County bylaws require every business premise to have a fire extinguisher. For this you will require to pay for a fire inspectorate license which will average Kshs. 2500. The fees could be higher depending on the size of the building. The exact will also depend on the county.

Cosmetics Retail Shops Set Ups

General Retail Supermarkets which sell cosmetics as part of their larger offering.

General Retail Shops which sell a few cosmetic brands among other consumer items

Chemists which sell cosmetics as part their products

Specialist Cosmetics shops. These could be small, medium or big.

Online Cosmetics Shops which operate only on the internet without a brick and mortar presence.

Cosmetics Supermarkets – The best known are Bestlady and Beauty Options in Nairobi and other parts of the country. They offer the convenience and freedom of shopping in a traditional supermarket but now with a wider variety of cosmetics products.

Cosmetics Hawkers – These operate on the streets, offices, online spaces, colleges and whatever setting they can penetrate. They don’t have permanent premises or a big stock. They source items in small quantities from wholesalers or independent importers.

Major Steps in Setting Up

1.Identify location. Make sure there is a gap in the market that you are going to fill. Be extra careful if there is a dominant cosmetics retailer, large supermarket or other well known cosmetics shop. Have a very clear plan of how you are going to compete. What is it that you will offer and which your competitors don’t have? Could it be that the market is

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underserved and there is room for one more? Is it a growing market by population or construction?

2.Decide on the set up you want; specialist say hair only, supermarket kind of setup, retail shop or other.

3.Renovate premises if need be: shelves, painting, and signboard. Make it easy for customers to see what you are selling.

4.Apply for various business licenses.

5.Decide which products to stock depending on your budget and the needs of your target customer.

6.Find out the retail prices of most products in your location.

7.Compare prices between different wholesalers and make purchases.

8.Set your prices. Based on your purchase price, competition and market strategy.

9.Open the business.

Stocking

Like we mentioned before there are hundreds brands of cosmetics. The main categories (not brands) include:

Weaves and Braids

Hair Foods

Hair Conditioners and Shampoo

Hair Relaxer

Body Lotion

Hair Sprays

Hair Treatments

Hair Gels

Hair Dye

Skin Products

Make Up Products

Body Perfumes, Roll ons and such

Generally women across all social classes have more or less the same cosmetics needs. The difference is in how much they are willing and able to spend, how much they know. i.e. their social exposure which influences specific tastes.

Stock based on your target market: low, middle, high end, rural, urban, young, middle, aged, mature, career and the like.

At least have common visible brands that cut across all the classes (see below for some of the popular brands in different categories ) E. g Vaseline, Miadi, Nice and Lovely,

Nivea, Rexona, TCB, Movit and the like. If you don’t have the common products then consumers get the impression that your shop is poorly stocked “ haikuwangi na vitu”

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For each product at least offer a variety in terms of price and functionality. Although price is important across or social groups it’s more crucial among lower income consumes. Functionality is crucial across the board.

Although there are advantages of having a wide variety of stock, if your budget is limited then prioritize popular and growing products. Even with a big budget you need to know how to spread the money so as not to end up with dead stock.

Ask your wholesaler, hair dresser and other such heavy users to advice on which is the popular brand at the particular time. Popularity of products keeps changing depending on marketing and what manufacturers come up with. Sometimes a product could be popular in a particular area and unpopular in another.

With enough capital you can have a little of everything but more often than not capital will be limited, and thus you have to stock intelligently. When deciding what to stock think of the specifics of your premises and its location. For instance if your shop will be near salons then you could be biased towards hair products. If in a high end mall then you should stock premium cosmetics products. If in the rural areas then mass market low priced products.

A good start is to familiarize yourself with cosmetics products. While this guide gives some broad strokes of some popular items, you will still have to familiarize yourself with various cosmetic products; there are a million and one.

You could start by visiting cosmetics supermarkets and wholesalers such as Bestlady, see what is available, and have conversations with attendants to know what is fast selling at a particular time in a particular area.

Among some popular brands are :

Body Lotions: Amara, Versman, Nivea, Nice & Lovely, Revlon and Eden

Hair Foods: Miadi, Venus, Baby Love, Blac Chic Nice & Lovely

Hair Gels: Movit Curl Activator

Hair Dye: Dark & Lovely & Beautiful Beginning

Hair Relaxer: Miadi, TCB, Venus

Hair Conditioner: Beula

Shampoo: Beula, Zoe

Foundations: Mac, Sleek

Nail Polish: Luron

Other popular items based on target customer are acne removers, stretch marks and other skin care products. In some areas skin lightening products such as Makari exfoliating soap are quite popular. Some herbal products like Himalaya Herbal Creams, Cantu Shea butter are also a favourite.

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Products in the Market

Original – Genuine products from the manufacture distributed through official channels.

‘ Backdoor’ Original – Genuine products from the manufacture but either stolen or sneaked from manufacturing plants, warehouses, delivery trucks , complimentary samples or export batches.

Original but independently distributed - This is more with international brands not officially represented in the country.

Fakes – Counterfeits. Products commonly counterfeited are aspiration brands which are popular but expensive. For instance perfumes and high end skin care and hair products.

Generics – Products with different brand names but with the same composition as the originals.

Fakes

Fake products offer larger margins. Sometimes fakes are sold at the same price as the original. This tempts some retailers and wholesalers to stock them.

Depending on the product there is no fool proof method to identify fakes. However a keen eye and proper product knowledge can help. For instance by noting inconsistencies in spelling, Arabic and Chinese instructions for products supposedly originating from the US and other such signals. Some products don’t have such tell tale signs especially if you or consumers have never dealt with them before. In the end only experience will help you guard against fakes.

Even some reputable wholesalers and retailers stock fake products especially of popular foreign brands like Mac which is originally from the US.

Retailers and consumers purchasing from such reputable wholesalers don’t suspect they are fakes. If they discover then they keep off the shop or the product. Consumers are especially unforgiving if the fake had been passed as an original and didn’t have the intended result, not to mention it was sold at a higher price.

Sourcing from appointed local representatives, distributors in the official chain of distribution helps reduce chances of purchasing fakes. Still if you are selling original and competing with a shop selling fool proof fakes at the same price you will be a slight disadvantage and a major one if the shop selling fake is more established.

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Cosmetics Distribution Chain

Manufacturer /

Importer /

Authorized Dealer

Distributor

Wholesaler

Supermarket

 

 

 

Retailer

Consumer

Different manufactures use various distribution methods. A wholesaler is usually the link between the manufacturer and the retailer. But the general templates are as above:

Manufacturer (Importer / Authorized Dealer) – Distributor – Wholesaler / Supermarket – Retailer – Consumer

Manufacturer – Wholesaler – Retailer – Consumer

Manufacturer – Supermarket – Consumer

The distributor is a sort of super wholesaler in charge of a region. She gets the products from the manufacturer and sells to wholesalers, who in turn sell to retailers. At times the manufacturer sells directly to a wholesaler who then sells to retailers.

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Manufacturers want their products to get to as many of their target consumers in the most efficient way possible. Some zone the country in various ways and appoint distributors to be in charge of a region.

In choosing a distributor a manufacturer could consider things like an understanding of the local terrain, existing sales, availability of transport, location and premises, credit history and business acumen. Other manufacturers don’t zone and will sell to anyone who meets the minimum purchase threshold to enjoy discounted prices. Smaller manufacturers will sell directly to any wholesaler and retailer who agrees to take in their products provided they meet the minimum quantities.

The above distributor considerations could also be used if a manufacturer is selling to wholesalers directly. In both cases more often than not a manufacturer will require the wholesaler to deposit a security amount with them. The exact varies with the manufacturer and sometimes region but is between Kshs. 500,000 and Kshs.2m. Then you will have sales targets that you have to meet or less the distributorship will be cancelled and go to someone else.

The conditions are more stringent for those without any established business, say shop or supermarket. For instance initially you may have to pay for products in cash, before the manufacturer starts extending credit to you, which allows you to pay after a few days. Other manufacturers will insist that you become exclusive; meaning that you can’t trade in competitors’ products.

Distribution and wholesaling is about volumes; purchasing large quantities from the company to enjoy lower prices and all manner of discounts which then turn to profits when selling to retailers.

In Nairobi the major distributors and wholesalers are found on the upper side of River Road, near the junction with Latema Road. Nyakio House which is around there hosts some of the big distributors like Gawa Cosmetics, Best African and Beauty Paradise. Bestlady a leading wholesaler and retailer is a short distance away. Another major concentration of wholesalers is along Dubois Road, Nairobi. Some smaller wholesalers purchase from these major distributors and resell to retailers in their neighbourhoods

There is another class of wholesalers who import products directly from Dubai, China, Nigeria, Turkey and Europe and distribute to local retailers. The products could be brands not manufactured in Kenya, international brands which are cheaper and more affordable in the Asian markets, hair products like weaves, perfumes, generic cosmetics products and basically anything that will turn a profit locally.

Some of the importers deal with one or two products while others have established themselves as importers of all things cosmetics. Importing cosmetics products requires you to have an understanding of the market and where possible a knack to escape paying custom duties and regulatory inspection.

In addition you need have a distribution system of sorts. More than ever before it’s much easier

to import, and many entrepreneurs do so without proper planning (“Oh there is no way weaves

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can’t sell”) and end up with products stuck in shops, houses or warehouses because they can’t

find ways to properly penetrate the market.

Wholesalers: In Summary

There are thousands of cosmetics products some even without brand names.

The highest density of wholesalers is in Nairobi’s Dubois road and River Road. Dubois Road is sandwiched between Latema Road and Accra road, both which link to River Road near Tea Room Matatu stage.

Along River Road there is a high concentration in Nyakio House, at the junction with Latema, and in stalls all the way to Mombasa Guest House towards fire station.

Kamukunji area near OTC has also its fair share of wholesalers. And so is Stagematt opposite Country Bus station.

General grocery and household items wholesalers along Keekrock road and off OTC also stock some of the common cosmetics without necessarily being specialist cosmetics wholesalers.

There are also wholesalers located in some of Nairobi’s estates like Kibera and Kawangware.

Eastleigh in Nairobi has also tens of cosmetics wholesalers

In the above mentioned areas you will get all kinds of cosmetics: local, imported, fakes, originals, generic and none branded.

There are also major wholesalers in all major towns. For instance Bestlady is expanding fast in many towns. (See index for some of the wholesalers)

Some retailers outside Nairobi have working relationships with city wholesalers where they make orders, send money and the goods are delivered to them by courier.

The price difference between wholesalers is at times big so shop around to get the best deal. One wholesaler could have a low price for an item and higher for another. Due to consumers being price sensitive try get the lowest prices possible. With some wholesalers there is room for negotiating.

There are many well known and popular international brands without official distributors in the country. Although this is rapidly changing. Meanwhile there are individuals or small companies that import them from Dubai or the United States and distribute locally.

There are also many independent suppliers who import items and distribute through their own channels. Some advertise in the newspapers, Facebook groups and online classified sites such as olx.co.ke and Jumia. You can check them out to see if they offer better prices or will help expand your product range with unique but in demand items. After you open a few of these will come offering to sell you their products.

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Revenue

Before we look into some revenue details below are a sample of cosmetics retail and wholesale prices to help you get an idea of the margins.

Please note these prices are from different wholesalers. Although these are actual prices use them as a guideline since prices could change, and vary from one wholesaler to another. It’s the same case with retail prices.

The prices below are of April 2017.

Sample Wholesale & Retail Prices

Weaves & Braids: Wholesaler A

 

Item

Wholesale Price

Retail Price (Kshs.)

Margin (Kshs)

 

 

 

(Kshs)

 

 

 

 

 

 

 

Weaves

 

 

 

 

 

 

Daniela

 

 

 

 

 

 

 

 

415

 

500

85

 

 

 

Victoria

 

 

 

 

 

 

 

 

415

 

520

105

 

 

 

Blessing

 

 

 

 

 

 

 

 

450

 

575

125

 

 

 

Adar

 

 

 

 

 

 

 

 

420

 

500

80

 

 

 

Fiesta

 

 

 

 

 

 

 

 

420

 

495

75

 

 

 

Princess

 

 

 

 

 

 

 

 

440

 

545

105

 

 

 

Ripple curl

 

 

 

 

 

 

 

 

415

 

510

95

 

 

 

Ripple plus

 

 

 

 

 

 

 

 

420

 

520

100

 

 

 

Retro

 

 

 

 

 

 

 

 

420

 

500

80

 

 

 

Atisto

 

 

 

 

 

 

 

 

615

 

725

110

 

 

 

Diva w

 

 

 

 

 

 

 

 

570

 

660

90

 

 

 

Chilli

 

 

 

 

 

 

 

 

550

 

700

150

 

 

 

Patra

 

 

 

 

 

 

 

 

550

 

615

65

 

 

 

Spanish

 

 

 

 

 

 

 

 

155

 

200

45

 

 

 

Softdread

 

 

 

 

 

 

 

 

250

 

375

125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Milo

 

 

 

 

 

 

310

 

450

140

 

Ponytail

 

 

 

 

 

 

180

 

250

70

 

Galaxy

 

 

 

 

 

 

490

 

605

115

 

 

 

Braids

 

Abuja

 

57

 

65

8

Avis

 

54

 

65

11

Sistar

 

55

 

65

10

 

 

 

 

 

 

Lotions: Wholesaler B

Item

Size (ml)

Wholesale

Retail (Kshs.)

Margin (Kshs.)

 

 

(Kshs.)

 

 

Nice & Lovely

590

170

195

25

 

400

135

150

15

 

200

85

100

15

Eden

750

490

565

75

 

500

380

435

55

 

300

285

330

45

Venus

400

220

240

20

 

200

120

140

20

 

100

80

105

25

Zoe

600

180

220

40

 

400

130

160

30

 

200

85

110

25

 

100

55

70

15

Nivea

400

330

400

70

 

200

190

240

50

 

100

120

150

30

Sample Wholesale Prices:

Hair Foods : Wholesaler C

 

Item

Quantity

Wholesale Price

 

 

 

 

 

 

(Kshs.)

 

 

 

 

 

Miadi

400gms

300

 

 

 

 

 

 

200gms

175

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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85gms

50gms53

Venus

420ml285

210ml195

95ml105

60ml63

TCB

10oz330

6oz215

3oz125

Lotions: Wholesaler D

 

Item

Quantity

Price (Kshs.)

 

 

 

 

 

Versman Lotion

400ml

220

 

 

 

 

 

 

 

150

 

 

 

 

 

 

200ml

 

 

 

 

 

 

 

100ml

95

 

 

 

 

 

Nivea Lotion

 

 

 

 

 

 

 

 

400ml

300

 

 

 

 

 

 

200ml

200

 

 

 

 

 

 

100ml

150

 

 

 

 

 

 

 

 

 

 

 

 

 

Miadi Hair Food

 

 

 

 

 

 

 

 

400gms

310

 

 

 

 

 

 

200gms

180

 

 

 

 

 

 

85gms

90

 

 

 

 

 

Miadi Leave In

 

 

 

 

 

 

 

 

475ml

280

 

 

 

 

 

 

237ml

165

 

 

 

 

 

Movit Leave In

 

 

 

 

 

 

 

 

400ml

340

 

 

 

 

 

 

100ml

87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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50ml

50

 

 

 

 

 

Radiant Leave In

 

 

 

 

 

 

 

 

480ml

370

 

 

 

 

 

 

250ml

165

 

 

 

 

 

Movit Curl Activator

 

 

 

 

 

 

 

 

700gms

180

 

 

 

 

 

 

360gms

125

 

 

 

 

 

 

140gms

67

 

 

 

 

 

 

80gms

31

 

 

 

 

 

Lotions: Wholesaler E

 

 

 

 

 

 

 

 

 

 

 

 

 

Item

Quantity

Wholesale Price

 

 

 

 

 

 

(Kshs.)

 

 

 

 

 

Amara

400ml

255

 

 

 

 

 

 

200ml

130

 

 

 

 

 

Versman

 

 

 

 

 

 

 

 

400ml

285

 

 

 

 

 

 

200ml

175

 

 

 

 

 

 

100ml

105

 

 

 

 

 

Nice & lovely

 

 

 

 

 

 

 

 

590ml

200

 

 

 

 

 

 

400ml

175

 

 

 

 

 

 

200ml

110

 

 

 

 

 

 

100ml

80

 

 

 

 

 

Eden

 

 

 

 

 

 

 

 

750ml

550

 

 

 

 

 

 

500ml

410

 

 

 

 

 

 

300ml

315

 

 

 

 

 

Venus

 

 

 

 

 

 

 

 

400ml

285

 

 

 

 

 

 

200ml

135

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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100ml102

50ml55

Hair Foods: Wholesaler G

Item

Quantity

Wholesale Price

 

 

 

 

(Kshs)

 

 

Miadi

400gms

375

 

 

 

200gms

225

 

 

 

 

 

 

 

 

85gms

110

 

 

Venus

 

 

 

 

 

420ml

315

 

 

 

210ml

218

 

 

 

95ml

175

 

 

Shampoo: Wholesaler I

Item

Quantity (Liters )

Price

 

Zoe

 

 

 

 

1

165

 

Zoe apple shampoo

 

 

 

 

1

155

 

Zoe apple shampoo

 

 

 

 

5

850

 

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Revenue Observations

Margins in the business are in the range of 10% – 30 %.

There above prices are from a sample of different retailers and prominent wholesalers.

The price differences between wholesalers are at times as much as Kshs.100 while for retailers is as much as Kshs. 20. Sometimes this could be between wholesalers and retailers within a 50 meters radius.

Minimum quantities to enjoy wholesale prices vary from wholesalers to wholesaler. For some of the major wholesalers like Bestlady or Gawa whether you are a buying a single item or a dozen the price is the same.

Other wholesalers have minimum quantities for everything which averages 6 items but can be as low as 3. Others don’t tie wholesale prices to minimum quantities but the total amount spent irrespective of the quantities of each. For instance if you spend Kshs.10, 000 on a variety of items. This is irrespective whether you are buying one of each or 12.

Pricing

There are no guidelines on pricing, thus it’s possible to find differences of between Kshs. 5 and Kshs. 100 for the same product.

Due to the price differences between wholesalers, two retailers within the same location could sell the same product at different prices. Alternatively the retailers could sell at the same price but one enjoys higher margins. Keeping everything constant the retailer with higher margins is likely to grow faster.

This is a price sensitive market. Price based competition is at times very intense.

In major towns there is a lot of price discrimination where the same product is sold at different prices based on the retailers’ assessment of the consumer’s ability to pay.

Prices also depend on target market with prices relatively higher when targeting higher income consumers.

Shops located near a major popular supermarket or cosmetic shop and without any value additions price lowest possible. Still they rarely beat the supermarket.

Competing with supermarkets on prices and major cosmetics can lead to losses. Compete on value, variety, service, opening hours and marketing. Not that you can ignore prices.

For premium brands and where the target is mid income consumers very low prices will hint at fakes while very high prices imply exploitation. For instance a particular Mac

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product retails at Kshs. 5500 at a leading city pharmacy and Kshs. 500 at a shop along River Road. The latter is a fake.

Hair dressers, who are a significant part of the customers, are extremely sensitive to prices. It’s very easy to win them with low prices. However there are also very keen on results; they may not care whether a product is fake or real as long as it gives the desired results and customers keep coming back.

Before settling on prices know how much your competitors are selling the most common and fast moving products. Price the same, slightly lower or slightly higher if you are having value additions.

Some wholesalers can guide you on what retail prices but at the end of the day use the specifics of your location and target market to make a decision.

Factors Influencing Revenue

Location – Competition in the neighbourhood, target market, spending power of the target consumers, presence of dominant players

Variety - The bigger the variety of items the more you are likely to sell. Still this does not mean having variety for varieties sake. Have the products that fit the lifestyle, needs and income of the target customers.

Source of Products – If you are able to source intelligently then you will enjoy higher margins or have room to offer a variety of prices and if need be compete on prices.

Marketing – Proactive marketing works especially when selling to salons. Simple things like a proper signboard, good display and a professional customer friendly image have a positive impact on revenue.

Price - Price will determine your margins. See pricing above.

Service – Customer care, helping customers chose product, giving the customer several options depending on their needs and budget, confidentiality especially in estate shops, packaging and an element of professionalism bring back customers leading to more revenue in the long term .

Fake or Original - When fake products are priced and passed for originals they generate more revenue. However if the fakes have negative effects say on the skin or hair of the customers and word spreads then it might be the end of the business. Be careful how you handle fake products.

Capital

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Item

 

Breakdown

 

Total

 

 

 

 

(Kshs.)

Licenses

 

 

 

 

 

 

 

 

Single User Business Permit

 

1

 

10,000

Signboard License

 

1

 

3,000

Fire Inspectorate

 

1

 

1,500

Waste Management

 

1

 

1,500

Sub Total

 

 

 

16,000

 

 

 

 

 

Equipment

 

 

 

 

 

 

 

Shelves and Display

 

All

 

25,000

Fire Extinguisher

 

1

 

4,000

Signboard

 

 

 

10,000

Other Equipment (E.g. Mirrors )

 

All

 

5,000

Sub Total

 

 

 

44,000

 

 

 

 

Stock and Related

 

 

Stock

 

Various

 

300,000

Stock Related Expenses (Such as Transport)

 

All

 

10,000

Sub Total

 

 

 

310,000

 

 

 

 

 

Premises

 

 

 

 

 

 

 

Rent

 

2 months deposit + 1

 

45,000

 

 

month rent. Will depend

 

 

 

 

on location. (@

 

 

 

 

Kshs.15,000 per month)

 

 

Renovation and Remodeling

 

Repainting and any

 

10,000

 

 

branding

 

 

Sub Total

 

 

 

55,000

 

 

 

 

Working Capital

 

 

 

 

 

 

Salary

 

3 months @ Kshs.10000

 

30,000

 

 

per month ( 1 employee)

 

 

Other

 

3 months @ Kshs.5000

 

15,000

 

 

per month

 

 

Sub Total

 

 

 

39,400

 

 

 

 

 

 

 

 

Grand Total ( Adding all the above sub totals)

 

 

 

470,100

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Notes on Capital

The above figures are just guidelines. Specifics could vary. For instance the amount of rent you pay will depend on your location and the specific building you are operating from.

Licenses will also depend on the county and the size of your premises.

Renovation will be based on the present status of the premises.

The amount you pay your employee will depend on what you have negotiated, location and the revenue that you hope to generate. If you are running the business yourself then you can skip the salary until you are profitable.

The stock could be lower. A stock of Kshs. 300,000 will give you significant quantities and varieties. Still as can be seen from the prices you can start with stock as low as Kshs.50, 000 or even lower if you so wish. Remember in highly competitive markets scale and good stock could be a way of differentiating and attracting customers. Often customers will see scale and get the impression of variety and fair prices.

Market Realities

The barriers to entry in the cosmetics retail business in terms of capital, process and suppliers are minimal. There are countless cosmetics shops which have started with a capital of Kshs. 50,000 and below.

Although this is not an ideal amount in an urban center (such as county headquarters) where rent could be a high and a wider variety desirable, it’s a sum big enough to set up a basic cosmetics shop.

In cities and towns like Nairobi, Nakuru and Kisumu a capital of Kshs. 400,000 is enough to set up a decent cosmetics shop. This is a sum many entrepreneurs can raise.

Besides, there has been the emergence of online cosmetics shops. The online traders source for orders through the internet, particularly Facebook, blogs, online classifieds and own websites. They don’t pay rent, licenses or taxes. Some even don’t hold any stock and only purchase items when they have an order. This means anyone with as little as Kshs. 15,000 can start selling cosmetics online.

This is also the case with the office and college cosmetics hawkers: workers and students who sell cosmetics to their colleagues.

All the above factors coupled with the overall demand for cosmetics will continue attracting more entrepreneurs to the cosmetics business, and competition will continues to rise.

From the bigger perspective opportunities exist in the business and margins for some products are quite attractive. So then if that is the case how comes a casual look in every urban center, the daily newspapers classifieds and online classifieds show a significant number of cosmetics shops closing down or put up for sale?

Simply because the business is very competitive and on average the margins are relatively low. To break even, turn a decent profit you need volumes for the mass market or sell premium products at premium prices.

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For instance if we work with average margins of 20%, to make gross profits of Kshs. 20,000 you need to have sales of Kshs.100,000; an average of Kshs.3500 in a day. Achievable? Yes in the right location, target and pricing. But you have rent labour and other miscellaneous expenses to meet. This means you need to hit higher volumes.

The ability to succeed as an individual cosmetics shop will depend on how well you are able to compete which narrows down to your location, target market, how you source, variety and knowledge of the cosmetics market, trends and needs of customers. These will become clear below.

Competition and Survival

Reasons for Closing Down or Selling Cosmetics Retail Shops

(From a sample of entrepreneurs closing or selling their cosmetics shops)

Losses due to competition.

Low returns due to competition.

Inability to compete based on price.

Low capitalization and thus limited variety compared to competition.

Poor management and marketing.

More profitable alternatives.

Incompetent employees.

Unrelated reasons.

More profitable alternatives – One rebranded as a salon rather than cosmetics shop, another converted to a movie shop, another to a water and diapers distributor. These are profitable in light of particular locations.

Major Sources of Competition

Supermarkets

Other dominant players in an area

Informal traders like hawkers

Best Place to Locate

Where there are a large number of the target customers.

For low income consumers where there is no supermarket or dominant shop nearby unless you have bigger variety and lower prices.

Where there is no cosmetics shop offering a wide variety for the target client.

Where, if need be, you are able to compete on price due to economies in sourcing, supply intelligence or cost management.

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Where there are economies of location; like concentration of salons or in an area known for cosmetics and people come from all over to shop there, ensuring high foot traffic of the right kind of customer.

Major advantage of Traditional Supermarkets over Cosmetics Shops

Price – Because supermarkets purchase items in bulk directly from manufacturers they are able to arm twist them to offer lower prices. The low prices attract customers. This is a big challenge especially in low income areas.

Shopping Freedom – In a supermarket one is able to take their time looking at different items – ingredients, manufacturer, smell, price, something most cosmetics shops (unless cosmetics supermarkets) do not offer. It becomes worse if the cosmetics shop owner or his employees are impatient, hence consider the customer who wants to try look at different items before making a purchase decision a nuisance.

Ability To Attract Foot Traffic – Because of the many products supermarkets offer, including food stuffs, they are able to attract high foot traffic. A customer could have come to purchase sugar, passes through the cosmetics shelf and decides to also purchase lotion rather than go shopping again.

Trust Regarding Product Quality - Though it’s possible to get fake products in some supermarkets, consumers trust supermarkets more than individual cosmetics shops. They believe the possibility of getting fakes or sub standard products in a supermarket are lower.

Competing with supermarkets

Have a wider variety of cosmetics products than the supermarkets. Although supermarkets will have all the ‘common’ brands they tend to play it safe going only for the big brands and relatively well established companies. However there are many cosmetics products which are not mainstream but which are in high demand. So have as much variety as possible both in terms of quality and price.

It’s possible to beat supermarkets on price by sourcing intelligently. Where the supermarket is pulling all the customers because of price then you need to match or better them.

Be there to advice customers based on their challenges and needs. (Oh my skin is getting these white things…). Traditional supermarkets have attendants but these are not specialized and some don’t have very good knowledge of the products. Not to a level they can give trusted recommendations.

Where possible offer customers a way to interact with products. For instance by smelling, reading labels, opening and looking at the color. This could be by designating a few sample products.

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Have tools such testers that help identify tones to make the shopping experience richer.

Assure customers about the quality of your products. This could be by word, presentation, displayed receipts, calendars, posters or anything that can validate your products.

Offer discounts. You don’t need to discount everything but one or two popular items. You will make up with other products which you can sell higher. The aim is to develop an edge as the shop with fair prices. Where your prices are lower or match the supermarkets advertise them. If consumers are not aware you offer low prices then it will be of no use. Although word of mouth will eventually identify your shop as the best priced, it could take long; a simple board outside the shop can do wonders.

Active marketing. Don’t simply wait for customers to come. Go find them. This of course will depend on your location. For instance where there are salons approach the hair dressers directly or on the side and ask them to purchase from you if not recommend your shop. There are cosmetics shops which ‘pay’ hairdressers to act as ambassadors of sorts and influence others to purchase there.

Why Consumers Chose a Particular Cosmetics Shop

Location

Recommendation by family, friends and colleagues

Fair price

Service - Great service as stated in the section above

Dominance – The shop is dominant and well known

Branding – Which creates trust

Variety – Almost sure to get the right product for whatever need at a good price

Marketing – Responding to some marketing effort. E.g. sales lady, signboard

Critical Success Factors

Location

Pricing

Variety

Service

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What Competition is Based On

Location

Locating in high traffic areas

Locating in areas with little competition

Locating in areas with the right target customers for your products: high, middle or even low incomes. Middle and high end customers preferred because of their high spending powers which translates to higher margins and high turnover. But they are also more demanding in terms of variety, quality of products, expectations of professionalism and service.

Locating in areas with location economies; Already known for cosmetics .For instance Dubois Road in Nairobi CBD.

Locating in an area with a high density of potential customers ; Like buildings with many salons

Variety

Having a wide variety of products beyond the basic

Having niche products

Depending on the target market having variety in terms of quality and results, or having variety in terms of prices; products which give the same results but have different prices.

Stocking what the competition doesn’t.

Prices

Having the lowest prices within a location

Having fair prices. Not necessarily the lowest but within the market range.

Price discrimination – Charging different prices to different customers based on your perception of income, taste and aspirations.

Cosmetics Knowledge

Having enough knowledge of products to be able to advise the customers accordingly.

Showing more than pedestrian skill to be able to deduce customer challenge and offer solutions.

Understanding of cosmetics trends – what is happening in the market, what others are doing, what is ‘hot’?

Service

Polite and helpful.

Having product samples customers can smell, touch without much limitation.

Having right tools.

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Discounts, gifts to regular customers

Opening & Closing Hours

This depends on location. In some areas because of security concerns you have to close early.

Consistently opening early and closing reasonably late say 8pm, opening for more days e.g. even on Sundays. This is so as to allow as many consumers as possible to buy at your shop; you know when everyone has closed. This will depend on the location of your premises and location.

Marketing

Proactive marketing that seeks to draw in customers rather than just wait for them to walk in.

Using sign boards.

Attractive and ‘tempting’ display.

Using sales personnel.

Display of product and price information.

Branding.

Niche

Focusing on a class of customers - by income, by taste, by age.

Focusing on particular products – hair, perfumes, skin.

There is more room for specialization. Hair specialization is the most common practice but there is room for specialization in skin care products. Customers are more likely to trust a specialized shop than a general one.

Specialization requires you and your employees to enough knowledge in the particular field so as to offer practical recommendations and solutions to customers. They should get an impression that you are an authority in the products you have specialized in.

Suppliers

The below list of wholesalers and distributors is not exhaustive, but it should jumpstart you.

Wholesalers

 

Name

Contact

 

Contact Person

 

Location

 

 

Manoj Service

0722-770212

 

Mr. Rajesh

 

Eldoret

 

 

 

 

 

 

 

 

 

 

Lucy Beauty

0722 961 379/0735 124 712

 

Mr. Moses Murithi

 

Maua, Adjacent

 

 

Ware House

 

 

 

 

Maua Main Stage

 

 

 

 

 

 

 

Exit

 

 

 

 

 

 

 

 

 

 

Hasmukn G.

053 2062731

 

Mr. Keshavji M

 

Eldoret – Uganda

 

 

Dodhia & Sons

 

 

Shah

 

Road

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Limited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gawa Cosmetics

0722-522432

 

Mrs.Rose Wambui

 

River road

 

 

 

 

 

Muturi

 

Nyakio House

 

 

 

 

 

 

 

Ground floor

 

 

 

 

 

 

 

 

 

 

Euro Cosmetics

 

 

Mr. Anish Popat

 

Tubman Road

 

 

 

 

 

 

 

Market mansion

 

 

 

 

 

 

 

Building

 

 

 

 

 

 

 

 

 

 

East End

0720200145

 

Dr.Peter Githinji

 

Tom Mboya

 

 

Chemist

 

 

Thairu

 

street next to

 

 

 

 

 

 

 

consolidated

 

 

 

 

 

 

 

bank

 

 

 

 

 

 

 

 

 

 

Diana House of

0721 605 130

 

Ms. Diana

 

Uganda House,

 

 

Beauty

 

 

Mwangangi

 

Kenyatta Avenue

 

 

 

 

 

 

 

 

 

 

Darax

22-806119/0733 962328

 

Mr. Xavier Lobo

 

Njuri Ncheke

 

 

Enterprises

 

 

 

 

Road Lobo

 

 

 

 

 

 

 

Building

 

 

 

 

 

 

 

 

 

 

Cosmix

0725-335453

 

Miss Jane

 

Perida Center

 

 

Cosmetics

 

 

Muthoni(Maureen)

 

2nd floor, Dubois

 

 

 

 

 

 

 

Road - Nairobi

 

 

 

 

 

 

 

 

 

 

BestMan

0722-783096

 

Mr. Stephen

 

River Road

 

 

cosmetics

 

 

Karanja

 

Nyakio House

 

 

 

 

 

 

 

 

 

 

Bestly Cosmetics

0720-712675

 

Mrs.Tecla Karanja

 

Mombasa Road,

 

 

 

 

 

 

 

Opposite Tuskys

 

 

 

 

 

 

 

Head Office,

 

 

 

 

 

 

 

River Road,

 

 

 

 

 

 

 

Ronald

 

 

 

 

 

 

 

 

 

 

Best African

0722-856205/0714 223320

 

Mr. Andrew

 

River Road

 

 

 

 

 

Macharia

 

Nyakio House

 

 

 

 

 

 

 

Ground floor

 

 

 

 

 

 

 

 

 

 

Beauty Options

0717 451 141

 

Mr. Shamir Walji

 

Kimathi Street

 

 

 

 

 

 

 

Eagle House

 

 

 

 

 

 

 

 

 

 

New Beautiful

0720-811000

 

Mr. Joseph

 

Thika- Njobas

 

 

Beginning

 

 

Ng’ang’a Gitau

 

House, Bus

 

 

Cosmetics

 

 

 

 

Terminus

 

 

 

 

 

 

 

 

 

 

Rukhshmani

0725 902525

 

Mr. Jayesh

 

Meru-Makutano

 

 

Enterprises

 

 

Bhagubhai Patel

 

Town, Meru

 

 

 

 

 

 

 

Maua Road, Next

 

 

 

 

 

 

 

to Budget

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Supermarket

 

 

 

 

 

 

 

 

Opposite Mosque

 

 

 

 

 

 

 

 

 

 

 

Sarah Beauty

722-661699

 

 

Mr. James Irungu

 

River Road

 

 

Shop

 

 

 

Wagako

 

Nyakio Building

 

 

 

 

 

 

 

 

 

 

 

Slopes

0722

 

 

Mrs. Elizabeth

 

Embu

 

 

Cosmetics

355780/0733947885/0724313464

 

Kirigo Nteere

 

 

 

 

 

 

 

 

 

 

 

 

 

Xpose Beauty

0722 163789

 

 

Mr. Ambrose

 

Bus Stage – Voi

 

 

Shop

 

 

 

Mugambi Njeru

 

 

 

 

 

 

 

 

 

 

 

 

 

Super Cosmetics

0710 600 965

 

 

Mr. Hanif F. Virani

 

Westlands,

 

 

(Westlands)

 

 

 

 

 

Reliance Plaza

 

 

 

 

 

 

 

 

Woodvale Road

 

 

 

 

 

 

 

 

 

 

 

Super Cosmetics

0716 163391

 

 

Mr. Hanif F. Virani

 

Koinange Street

 

 

(Koinange

 

 

 

 

 

 

 

 

Street)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Super Cosmetics

0724 401122/0720 612231

 

Mr. Mohamed

 

Mama Ngina

 

 

( Mama Ngina

 

 

 

Virani

 

Street Jubilee

 

 

Street)

 

 

 

 

 

Insurance

 

 

 

 

 

 

 

 

 

 

 

Spice Cosmetics

0722 243847

 

 

Mr. Muli

 

Eldoret

 

 

 

 

 

 

 

 

 

 

 

Ideala Cosmetics

 

 

 

Lawrence Mwenda

 

Meru

 

 

 

 

 

 

 

 

/Kawangware

 

 

 

 

 

 

 

 

 

 

 

Distributors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name

Location

Telephone

 

 

Contact Person

 

 

Peter Kiruthu

Nyeri

061-2032650/2050568

 

Mr.Peter Gitonga

 

 

Gitonga

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Milan R. Shah

Isiolo/Meru

064-20246

 

 

 

Mr.Milan Shah

 

 

 

 

 

 

 

 

 

 

 

Pramukh Cash&

Kisumu

057 2022449

 

 

 

Mr. Sanjey Patel

 

 

Carry Ltd

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shituls

Kisumu

057-20 – 2023010 /21844

 

Mr. Shituls

 

 

Enterprises

 

 

 

 

 

Panchmatia

 

 

 

 

 

 

 

 

 

 

 

Maz Distributors

Mombasa

041-2317891/0722 744333

 

Mr. Hussein

 

 

 

 

 

 

 

 

Mohammed Said

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Fast Masters

Nairobi

0202021295

Mr.Suleiman

 

 

 

Kamau

 

 

 

 

Khetia Drapers

Nairobi

054-31327/6 /3

Mr. Dinesh

 

 

0205/31327/31821/2/0202418486/7/8

Khetiah

 

 

 

 

Jaykay

Nakuru

051 2212101

Mr. Nitin Shah

Enterprises

 

 

 

 

 

 

 

Sample Cosmetics Making Profits.

The costing below is from Cosmetics Kenya, note that they train on how to make cosmetics. Though with a touch of reality figures below could be a way to entice you to sign up for the training. For more information on training contact them directly.

We have not verified the figures but plan to cover all this in the cosmetics manufacturing survey. Here we quote them directly:

Item: Vasson Body Milk Lotion

Batch Size: 1,000 bottles

Cost of Raw Materials

De-ionised Water=560/- Oils = 400/- Other ingredients= 1,000/- Containers @ 10/100ml bottle = 10000 Labels @ 50cts = ksh. 500. Total Cost of Production=12,460/- Therefore NET COST of production per bottle=12.50/-

Overheads Approximately 7.50/-. Sale per 100ml bottle=70 Net Profit Per Bottle = 50/-

Conclusion 1. Invest Ksh. 12,500/- and earn Ksh. 50,000. 2. If you can target daily sales of 100 bottles of your product, then in one month you will have sold about 3000 units with total income of Ksh. 150,000. That’s a good pay. Isn’t it? From here you can now go national, with commercial production. Diversify and have at least 10 different brands, and your net monthly income will be a

cool 1.5 million!

Cosmetics Kenya office in Nairobi is situated at Embassy House, Harambee Street, just opposite Sheria House, next to the Office of the Deputy President. Embassy house is next to Parliament. First Floor. Telephone: 0723424240.

Don’t invest blindly

www.kenyaknowhow.com

0712 473 455

Page 31

Don’t invest blindly

www.kenyaknowhow.com

0712 473 455

Page 32