How to Start / Open A Mitumba Business in Kenya

Mitumba Business Plan (Kenya)



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This guide focuses on the retail of second hand clothes commonly known as Mitumba. Though the major focus is on the retail of mitumba we also briefly touch other aspects of the business.

There have been on and off efforts by the government to ban or restrict the mitumba business. However political considerations carry the day and such a ban is unlikely to come in effect soon.

As late as October 2015 the ministry of industrialization talked of eliminating mitumba in phases. Still it’s notable that when Uhuru Kenyatta was finance minister he reduced import duty on second-hand clothes from $0.3 per kilo (or 45 per cent, whichever is higher) to $0.20 per kilo (or 35 per cent, whichever is higher), a rate which is still applicable at the moment.

The East Africa Community has also been pushing for the ban of mitumba clothes either outright or by increasing barriers through higher taxes and quality inspections. This is supposed to help revive the local textile industry. Yet not much has come out of this. The business will certainly continue to exist in the near future.

There are no good statistics of the value of the mitumba business but sources at the Mombasa port estimate an average of 300 containers with mitumba clothes arrive in the port in Mombasa every month. In 2010 the UN estimated about 80 million kilograms of mitumba arrive in Kenya every month, and the number is still growing.

To consumers Mitumba are no longer just about going for low priced clothing rather it’s a matter of style, quality and standing out.

The Mitumba Supply Chain

The major players in the Mitumba Value Chain are:

Original / First Consumer usually in Europe

Collectors – Charity shops, Non governmental organizations

Textile Reclamation companies in Europe

Local Large Scale Mitumba Importer

Wholesaler

Retailers

Sub Retailers

Original /

 

 

 

Textile

 

Major

 

Collectors

 

 

First

 

 

Reclamation

 

Mitumba

 

 

 

 

Consumer

 

 

 

Companies

 

Importer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wholesalers

Retailers

 

Smaller Retailers &

 

 

Consumers

 

 

 

A Quick Note on Major Players in the Mitumba Value Chain

Original / First Consumer

He or she is found in Europe, Australia, Canada, USA and other western country. She is the original owner of the cloth item. She bought the clothes when they were brand new from a boutique, online shop, supermarket or whatever other source.

Often she gives away the clothes free of charge because she has bought more, they have run out of fashion, to create space in the wardrobe or by her own standards they are worn out or.

Rarely do the original owners sell their clothes; rather they donate as if giving to charity.

Collectors

These are based in the western countries (Europe, America) and collect the clothes from the original owners. Often they are charities and non governmental organizations. They use a variety of methods to collect the clothes.

The most common of these is by having charity shops where people can drop their unwanted clothes. Alternatively they use volunteers who move from door to door.

The charities collect the clothes to donate to those in need but more important as a source of income. They sell about 10% of the clothes they collect within their country and the rest to for profit companies in the textile recycling industry.

Because of the outsourcing of packaging there are now mitumba coming from China and Malaysia. The clothes are not originally from these locations; rather traders in Europe outsource packaging and sorting to them, and then resell from the Asian countries.

Textile Recycling / Reclamation Companies

These purchase the used clothes from the charity shops and non-governmental organizations. They grade the clothes, and then export to various parts of the world but largely Africa and parts of Eastern Europe and Asia.

Textiles recycling companies are for profit. They are the major link with mitumba importers in Kenya.

Large Scale Mitumba Importers

These purchase the second hand clothes from textile reclamation industries in Europe and bring to Kenya. The major importers are about 150 with 20, operating from ‘Docks’ in Mombasa, controlling a big share of the market. The bigger of the importers sell up to 8000 bales in a week. Until 2002 the second hand import markets had been caged and only a few individuals, mostly of Asian and Arabic origin and with the right political connections were allowed to bring in the clothes.

At present the market is more open with both large and medium sized entrepreneurs in the business. Large Importers bring the second hand clothes in containers then sell to wholesalers.

Mid sized importers could bring lesser amounts or join to import one container. Some large importers sometimes handle 2 to 5 containers within a month.

Most wholesalers are in Nairobi operating from godowns around and within Gikomba market. Importers not only have capital but crucial and long term connections with the exporters.

Wholesalers

Wholesalers purchase mitumba bales in bulk from the importers with whom they have built relationships. They could purchase stock once it arrives at the importers’ go down or on a daily or weekly basis as need be.

Large importers only sell to a select number of wholesalers who are consistent and have the capacity to regularly make orders.

The wholesalers could sell to smaller but significant wholesalers or to retailers based in Gikomba market, Toi or Kongowea in Mombasa and other parts of the country.

There are also wholesalers who import directly but in relatively smaller quantities when compared to the big importers.

Retailers

Retailers purchase bales from wholesalers, open the bales then sell to smaller retailers.

The Process in Detail

As noted above Mitumba are usually clothes first bought and used by consumers in the West. Consumers in the west have a higher clothes turnover when compared to countries like Kenya. This is because of cultural habits, rapidly changing fashion trends and higher income which affords more the citizens more disposable cash to purchase clothes.

An avenue then has to be found to dispose the used clothes which accumulate fast.

For clothes of average quality consumers donate to charity that means they don’t get any compensation. Donating clothes to charity is part of a social fabric and hence it’s common and with no monetary expectations.

However for high end designer clothes consumers hold on to them longer and at times use more formal means to sell them and earn money.

The mitumba that comes to Kenya is not designer but average daily clothes. The West’s equivalent of the clothes locally sold in stalls, low and mid level boutiques.

Charities collect the clothes as a source of income. Often they will have shops where consumers can drop used clothes. Alternatively they go door to door asking people to donate their used clothes.

To the charities the clothes are a source of extra income. The charities will sell about 10% of the donated clothes within the country and find ways to sell the rest by exporting to Africa and other developing economies.

In the West there is what is referred as the Textile Reclamation Industry. These consist of entrepreneurs who try making profitable sense of the tonnes of used clothes that are available from charities.

The businesses purchase the used clothes collected by the charities and either sell to their countries ‘rag’ industries or repackage and export.

In the latter case participants in the reclamation industry purchase used clothes from the charities and other collectors, pay per kilogram, package and export to Africa and countries in Eastern Europe.

To maximize profit, compete and look professional textile reclamation companies don’t just pack the clothes and dispatch, rather they sort and grade before exporting.

First they sort the whole batch by quality. The common categories at this stage are:

Cream- This is the best quality, consisting of high quality clothes which are almost new. These form 5% –10% of the clothes. The cream is not exported but sold locally through specialist shops. Only in rare cases is the cream exported.

Second Hand Clothes - These are of average quality. Great but not as good as the Cream. These are the clothes that are exported as mitumba. They account for between 40% & 60% of the clothes collected and form the most profitable part of the reclamation industry.

Others categories are; Fiber which is sold to recycling companies for the material; Wiping Clothes which are used to make rugs and puff. And then there is what is essentially Waste; very poor quality clothes that cannot be resold or recycled and can only be destroyed.

With the Second Hand Clothes set aside it’s time for further sorting, in order to maximize profits:

At this stage the clothes are sorted according to type; that is trousers, shorts, blouses, dresses, cotton, silks and so forth.

The clothes are further sorted by grade depending on the quality. Additionally they are classed by size, gender, material and so forth.

After all the clothes are classified they are packaged in bales each weighing a standard 45kilograms. Now the clothes are ready for export.

The reclamation companies use various tricks to make sure that they sell everything in their stock from the low to the high quality items, slow moving to fast moving.

For instance rarely will a reclamation company allow an importer to purchase only fast moving items say Grade 1 Jeans Trousers.

Say an importer want to get say 500 bales of grade 1 jeans the company will insist that he also purchases several bales of cotton trousers, pullovers, shirts and other items that could be deemed slow.

Otherwise if the importer was allowed to purchase only the fast moving items then the reclamation company would be left with large quantities of the slow movers and lower quality clothes.

Large importers bring in the mitumba in containers which hold a little of everything. There could be biased towards some items but rarely will you find a whole container containing only one type of clothing articles.

A container will contain an average of 500 bales. The number could be slightly more or less. The cost of a container will depend on the variety and quality of items but starts at an average low price of Kshs.2.5 million and could be as high as Kshs. 4 million. Other than the cost of purchasing the bales there is also the cost of freight, import duty and clearing.

The mitumba market is becoming more open and now there are more importers. This is unlike pre 2002 when the market was tightly controlled by 100 or fewer politically connected individuals. Some of the smaller traders who can’t individually afford the cost of importing a container on their own join and purchase as a group.

Presently there are more sources of the mitumba including relatively easily accessible markets like Dubai. There are also more channels through which to sell.

For example there are small and mid sized importers selling through the internet particularly social media and online classifieds. You don’t necessarily need to be based in Gikomba or build relationship with the retailers at the mitumba major markets for you to get into the business.

Please note this is the general flow of the mitumba business. Specifics vary depending on country of origin, the exporting reclamation companies and importers.

What Happens When The Mitumba Arrives In Kenya

The mitumba gets to Kenya and is cleared at the port of Mombasa then ferried to the importer’s premises. What happens next will depend on the importer.

Large importers who bring in several containers and who have been in the business for long don’t sell to retailers at all. Some are strict in who they deal with and have an established clientele of wholesalers who they sell to exclusively. Rarely do they sell to stranger unless a person has been introduced by a broker or shows a good understanding of the market and buying potential, and clarity of what he wants; the importer is not the person to ask “What should I buy? What sells faster?”

The strictest do not even allow the customer to open and peep inside the bale to see what is inside; once you buy go check it out at your premises and don’t come complain later. Sometimes Established wholesalers pre order bales even before the containers arrive in the country.

Yet this is not always the case. There are importers who allow even new comers to walk in and buy the bales they want, without so much hullabaloo.

Wholesalers

A wholesaler can purchase an entire container or individual bales; often the minimum number is 50.

The price and quantity will depend on the quality of the mitumba and the importer.

There are different levels of wholesalers. The ones we refer above are the very large wholesalers. Once these purchase from the importers they could sell to lesser wholesalers. They are biased to those who buy in as much bulk as possible.

Just as with importers wholesalers will insist that the smaller wholesaler buys a little of everything. However since they want to clear their stock as fast as possible and are dealing with wholesalers with various needs they are more flexible.

Some of the wholesalers bring in their containers directly from the West and Dubai and don’t necessarily depend on the large importers. What they import depend on the capital at their disposal.

The smaller wholesalers will sell to retailers still within Gikomba or the big mitumba markets. Retailers can also purchase from the bigger wholesalers. The system and process are not cast in stone and terms are adapted based on business relationships on the ground between any two traders.

Retailers

Retailers purchase from the medium and smaller wholesalers. They could purchase as few as a single bale or as many as need be. The more established of retailers purchase an average of 5 bales every day.

Once they purchase retailers at markets like Gikomba will open the bales and divide the content into 3 or so groups based on the quality. There is the 1st Camera which is high quality clothing, and then there is the second camera which is the next best. There could be a third camera but largely what remains after the first and second camera ‘cleared’ open to anyone. The purpose of all this is to maximize profits.

The retailers at markets like Gikomba have relationships with other retailers who purchase to sell in the estates or other smaller markets. Based on the relationships the 1st and 2nd camera are offered to the smaller retailers.

There are no first hand rules as to who gets to purchase the camera. The retailer is interested in maximizing profit and will listen to requests to purchase camera. Often they want the assurance that you are likely to be a consistent buyer and that you will purchase not two or so pieces but as many of the camera as possible. It’s the same with the second camera and so forth.

To the retailer the first and second camera should be enough to recover the cost of the bale, and earn some little profit.

On average a bale could have 30 first camera items, about 150 second camera items and the rest kawaida items.

Retailers who purchase first and second camera sell at premium rates in the estates, boutiques and stalls.

The clearance if not sold at the major markets like Gikomba is taken to other mass mitumba markets. And process is replicated again in a way. For instance you purchase the clearance from Gikomba and take to Kisumu, a seller who sells in Kondole market could purchase the best of these for onward sale. The process continues so that as the chain grows the quality of the clothes goes down.

For the major retailer at Gikomba average profits per bale range averages Kshs.3000. The exact figure depends on the quality of the items. And figures could go as low as Kshs.1000 or high as Kshs.8000. A wholesaler selling around 600 to 1000 bales per month could make anything between Kshs. 300,000 and Kshs. 700,000 per month.

Steps To Starting A Mitumba Retail Business

From the above it’s clear you can get into the Mitumba business at different levels. You can import, become a wholesaler, retailer, camera retailer or just general retailer. In this guide we focus more on retail.

The general steps to follow when starting a mitumba retail business are as follows:

Identify Location

Establish a location from where you are going to sell your mitumba.

The location could be what is available to you (Say someone tells you there is a free stall at the market), one which is convenient (say considering where you live and work) or one that fits the business.

The latter is of course the better consideration. In rural areas, low and mid income urban estates there are many mitumba dealers who don’t have a permanent location and rather move from place to place chasing consumers.

Among the key consideration when deciding on location for your Mitumba business are;

Foot Traffic – If you are selling low end clearance rummage then you need a very high traffic location. On the other hand if you are selling camera say trench coats you need just enough traffic of customers with the right income and tastes to purchase the items.

Economies of Location – There are areas which are known as mitumba places. The advantage of setting up in such an area is that you will have a ready traffic of consumers

who are looking for mitumba. So the cost of customer acquisition is much lower. It’s also much easier in such locations to build useful relationships with suppliers and generally have better knowledge of trends in the business

On the flip side competition in these kinds of markets is much more intense, meaning you have to work harder to stand out. Still because of the high traffic and diversity of customers more often than not there will be a customer willing to purchase what you have.

Social Economic Conditions – Depending on what you are selling consider the social economic conditions of the location. As stated above consider if the population has the income and also more important the taste to purchase what you are selling. Related to this are also the natural conditions specific to the area. Is it a place where consumers are in need of heavy jackets?

Decide on what you are going to sell

When deciding what to sell consider the following:

Competition – You can pick the kind of item many in the mitumba business within the location are not selling. Still make sure the item is relevant to the area. This is terms of price, taste, weather, demographics and such other factors.

Don’t just look at what the competition is not selling, but what you can sell and capture the market. Let your decision be market driven.

Margins - Ideally you should go for high margins items. In the mitumba business the margins will depend on the quality of goods, wholesaler, income and taste of the location.

For some camera items in certain locations you can make 100% profit on an item. There is a lot of room for haggling in the business making it impossible to state exact margins of items. That said high quality items give higher margins. Lower quality items have lower margins, lower prices but they move fast in mass markets.

So once you zero in on a number of items that you want to sell, consider the local conditions, see at what price the competition is selling the items and then estimate how much you are going to make.

If you are buying a bale, margins will depend on the quality of the items inside and the choice of the type of clothes; jeans, bras etc. More on margins will become clear below.

Natural factors - If a region is very hot then there won’t be a good market for a heavy jackets and voice versa. Consider the weather and pick something that fits in.

Supplier Access

Trends / Demographics - At times there could be fashion items that are trending. Keeping everything constant and depending on what point in the fashion cycle you are getting in these could move faster.

Also it will depend on location; fashion items will move faster in urban areas as compared to rural areas. Fashion items also tend to have a definite life cycle... starting with a lot of excitement, the excitement reducing then dying or reducing significantly. You are likely to benefit more if you get into the business at the start of the cycle.

Trendy items are also more lucrative if they are of acceptable quality. This is because these are clothes people want to wear and be seen with as opposed to a just nice but not good item which can only be worn in the house or on a stroll to the kiosk.

Consider the demographics. If you are selling near a college then it helps if you have fashionable fairly priced items, and also handy clothes like jeans. Again urban and rural demographics are different in terms of taste and income.

Even where the rural have above average income they are more conservative in their spending and tastes. In urban centers there is more social pressure which impacts on spending even where income is lower.

Peri urban areas like country and sub county headquarters have a growing number of aspirational rural consumers who are looking to look good at affordable prices.

Capital - Your capital should determine what you are going to sell. This is terms of type and quality. If for instance you have Kshs. 3000 would you rather purchase 3 pairs of high quality boots at Kshs.1000 each or 9 trench coats at Kshs. 400 each? You look at this not in isolation but in line with all the above factors.

Identify Supplier

Once you have the location and decided what to sell you need to get a reliable supplier. The most important consideration of a good supplier is the ability to consistently supply you with the items that you want.

Consistency is important because it helps you maintain your brand and cut your losses. Though you can purchase from any supplier who offers what you want, it’s also good to develop good relationships with a few suppliers who are able to give you heads up when they have something you need, and who you can call any time and request to spare some stock or extend you credit when need be.

You also need a supplier who offers you good prices so as to maximize your profits.

The highest concentration of suppliers is in Gikomba and the surrounding areas. So how does a new retailer who has no idea of the market identify a supplier?

The best way is by references. Someone you trust introduces to a supplier she has worked with and trust. Still references are not always available. For 1st camera products there is much competition that people in the business are not so willing to introduce others.

The reality is that first camera items like dresses the demand is much more than the supply. There are upscale boutiques which stock such second items thus they are able to pay premium for the products and also take considerable quantities. The retailers will thus give priority to these and without references becomes difficult for new comers to penetrate the market.

Do you just walk to a place like Gikomba in Nairobi and start searching for a supplier? More or less but there are some things to think about;

There are several warehouses or godowns around the Gikomba area. The buildings are populated by smaller wholesalers and retailers. That would be a good place to start. There are some from the country bus direction and also the Kariokor direction near the mosque. One of the most popular with both new and established retailers is Mumbai House. There you find a variety of wholesalers both good and not so good largely selling in bales.

You can get a guide to show you around Gikomba market or Kongowea. There are guys who are in the periphery, look for someone who looks trustworthy and ask them to show you around. Say you want to know all the options, the pros and cons of different suppliers, locations and any other info. Some of these ‘guides’ are nothing but brokers so be careful and open minded especially when they recommend a particular trader. However some are genuine and will give you an objective run down of the area. Such will charge a one off fee which could range from Kshs. 300 to Kshs.1500.

If interested in camera you can also talk to retailers selling what you are interested in. Ask whether they could give a chance to select camera items. Of course there are all those stories about how difficult it is to get camera items, how some markets have

‘owners’ and such which discourage. The truth is there are no first hand rules about how to get camera items.

Some wholesalers / retailers only sell to specific retailers and others are more open. At the end it’s about your value proposition. Just like you the bigger traders are in it for profits, they want to open and sell bales as fast as possible with minimum customer management costs. That’s why, at times, they insist only in dealing with a few smaller retailers, who are consistent and purchase significant amounts at the right price.such retailers are said to purchase in wholesale. If you convince them you have the same ability then some will have no problem selling to you. You will also get others who are

open to anyone who walks in as long as they meet some basic conditions on price and quantity. If one declines keep looking, you will get a favorable retailer / wholesaler.

Be very sure what of you want in terms of choice and quality. Keep focused but also flexible. The available variety could be confusing.

Whenever and wherever you make a purchase try to build rapport with the retailer or wholesaler. This will come in handy in that with time he will be giving you heads up when new consignments .

To get the best items it’s advisable to be in the market (say Gikomba) as early as possible. Bales are usually opened early in the morning usually between 6a.m and 9am, and your competitors will be there already selecting the best of items.

The Mombasa equivalent of Gikomba is Kongowea market. The dynamics are more or less the same. The major importers run warehouses around the port from where they sell to wholesalers. The wholesalers have small stores and warehouses within the market from where they sell to retailers or brokers. There are at least 40 wholesalers at Kongowea.

There are many brokers along the chain, they are part of the business; judge each indecently. The most reliable ones can assist in getting best quality and prices while the worst are pure cons. Brokers have very good market knowledge of who is selling what, which containers have just arrived etc. This could be very useful at times.

Still as a new trader avoid brokers who look doubtful and purchase directly from wholesalers or retailers. From the one word go build good relationships. Where possible use the help of someone already in the business and who has a clue about prices. It’s common for wholesalers and brokers to charge as much as Kshs. 5000 on top of the usual price of a bale once they discover you are new and have very little information.

Check the label of the bale when available. If it has #1, it means the first quality is not included only lower quality items. However most wholesalers will reap of the label especially when selling to newbies, or like that #1 means first quality.

As a new trader you will have little power or effect in complaining about the quality of the bale to a wholesaler. However as you become a regular and purchase significant quantities you can complain and even demand lower prices for ‘bad ‘bales. You can also request the wholesaler to repackage the bales in your favor.

Decide on whether to start with a bale or selected single items

When starting you can opt whether to purchase a whole bale or individual items. There are pro and cons of both.

The main risk that comes with purchasing a whole bale is that you are never sure what exactly is contained inside in terms of quality.

Even if the sellers reassure on the quality sometimes they are not certain, at others they have a played a trick on you, sometimes they don’t care and want just to dispose of the items and sometimes they genuinely don’t know.

There is always the risk that you will purchase a bale only to find 20 items of good quality and the rest, 300 or so, just rummage that you can’t sell to your target clients, or have to sell at very low prices.

On the other hand you can find 30% of items of great quality, 40% good quality and the rest average and how quality items. In this case the returns will be high.

The question then is how will you know whether a bale is ‘good’ or ‘poor’?

The truth is you can never be 100% sure. With a bale there will always be risk. The advantage of a bale is the possibility of higher profits and depending on your location transiting to a wholesaler.

When you purchase single items the major advantage is that you significantly reduce the risk. You are sure of the quality of the item. The price is also expressly clear; and thus you easily know how much to sell it and whether it will give you the returns you expect.

The disadvantage of purchasing individual items is that the cost per item is higher. Also you don’t enjoy the economies that come with purchasing a good bale.

The other challenge is if you are going for the high quality items and you don’t have constant access to the best camera clothes you will have to do with average quality pieces which will leave you at a disadvantage.

If your capital is relatively low and you want to minimize risks as you understand and grab a share of the market then its advisable to start with individual items as opposed to a whole bale.

If you are going the bale way then have enough capital to consecutively purchase bales if the first one and second one don’t give good returns or lead to losses.

If you don’t have enough capital for that or the will to take much risk then you can start with selected single items then shift to the bales later. And it’s not a must that you shift to bales.

If the single items satisfy your market and give you great margins then you can stick with them. The reality is that you will never get a bale with all high quality items. This is not necessarily a

bad thing depending on your target market. If it’s the lower end market then items of standard quality though not the highest can be good enough.

Still it’s not a must you buy first camera items. If the second camera or clearance items suit your market then you can avoid the extra cost of 1st camera.

You don’t need to purchase first camera items if the income and tastes of your target market can’t afford or appreciate it. At the end of the day you seek to satisfy your customers while maximizing profits.

Remember both single items or bales can lead to losses or low returns if you don’t satisfy your customers, your location or marketing is poor among other factors.

Licenses

There are no special licenses that are required to start a mitumba business. The Single Business Permit that is issued by the county government is the one that is needed. The price will depend on the county, the location within the county and where you are operating; open air, shop, stall or any other premises. Open air markets can cost as little as Kshs. 600 per month while shops could average Kshs.7500 per annum.

The single business permit is issued by the county government at their offices or by county officials who go round collecting daily dues. Daily fee could be as little as Kshs.20.

Stock

The value of stock that you purchase will depend on:

-The type and quality of items. For instance children clothes, dresses, tops etc

-Whether you are purchasing in bales or single items

-Where you are purchasing – Different suppliers offer different prices

In reality you can start a Mitumba selling business with a stock of Kshs.2000. To illustrate this could be 40 average quality blouses bought from rummages, 20 Kshs.100 jeans and the like.

If you are purchasing bales then you need an average of Kshs.25, 000. This is an average and the amount could be as low as Kshs. 12,000 per bale.

Customers snap good quality items first. Thus when purchasing single items have some back up capital to help replenish stock that is moving fast. This will ensure you don’t end up with just slow moving stock which will reduce your returns and give potential customers wrong impression; she only stocks low quality items.

Restocking is a continuous process and to attract customers you need to keep having fresh items. Also you need to have back up capital in case your supplier delivers new stock with just the items you need.

If you are selling camera or second camera you can’t afford to lose such opportunities.

Hence if you are selling individual items we recommend you have at least Kshs.10, 000 that can be used to stock. You don’t need to start with items worth Kshs.10, 000 but also to have some back up cash. Again we insist that you can start with a lesser amount, even Kshs. 5,000 depending on what you are selling. Still always have some back up cash to keep restocking and meeting particular customer requests.

If you are selling bales, have as back up at least enough money to purchase another bale.

Premises

The cost of the premises will certainly depending on where you are operating. In enclosed spaces such as shops, exhibitions stalls and the like the rent will be higher.

Open air markets are relatively cheaper. However when there are location economies, like Gikomba then the cost could even be higher than even those of an enclosed space. Also some strategically located open air spaces say like those near bus stations rent is higher.

The exact amount of rent will depend on your location. A rule of the thumb is that have enough money or a plan to at least pay your rent for 3 months. Rent for shops and stalls could range from as little as Kshs.5000 to Kssh.30, 000.

When deciding how much to pay for rent consider if your location has enough of the target customers to help you make a profit and grow.

Revenue

Notes on Revenue

So how much will you expect to make if you purchase a bale of whatever items? There are no precise rules on this. The nature of the business is such that there is so much flexibility in both purchase and selling prices to an extent that it’s not possible to say this is the exact amount you are going to get if you purchase a bale or even single items.

Still there are some rules of the thumb. / Like a good bale should give you at least Kshs.5000 and that first camera items can be sold with a margin of 30% to 100%. Before we go to details and some figures it’s important to know what will influence revenue:

The type of items

The quality of the items

The price at which you purchase the items

The price at which you sell

Your location

Your target market

Your expenses

Let’s illustrate more on revenue by postulating some scenarios. Please note these are average figures, the exacts in terms of prices, pieces and quality will vary from supplier to supplier.

Revenue Scenario One (With Figures )

Trench Coats Example

The retail price of mitumba trench coats in Nairobi, and generally in the country range from Kshs.50 to Kshs.2000 with a mode of Kshs.500. The price difference is largely based on the quality, location and target market.

Now there is one wholesaler who sells a bale of trench coats at Kshs.28, 000. Such a bale contains 100 to 120 pieces. Assume this bale has 110 pieces. This means at wholesale each trench coat is being bought at an average price of Kshs.255.

Assuming you sell each trench coat at Kshs.500 that means that you need to sell at least 56 pieces for you to recover your purchase price without making profit. (56 x Kshs.500 = Kshs.28, 000)

If you sell all the 110 pieces at 500 you will net Kshs.55, 000. This will give you a gross profit of Kshs.27, 000. (Kshs.55, 000- Kshs.28, 000)

From this amount you will deduct Transport costs say Kshs. 1500, Manpower – Kshs.5000, Rent Kshs.5000. Total – Kshs.11500

This will leave you with Kshs.15, 500 (Kshs. 27,000 – Kshs.11, 500), over 50% in margins. And you being lucky hardworking and in a great location you are able to move 2 bales in a month. Not so bad, right?

This however is a very very ideal situation and not likely to happen

First the trench coats in that bale will not all be of the same quality. Whereas some will command a price above Kshs.500 a piece say Kshs.700, Kshs.800, some could be unsellable while others can only be sold in the low realm prices of Kshs.50, 100 and Kshs.200.

Why will some be unsellable? Because of their poor quality, they could be torn, with stains, running colors, damaged through ironing or any other reason. And depending on whom your target market is and the ‘local’ brand you want to build for yourself you could be forced only to sell the mid and high quality coats and none of the lower quality ones so as not to dilute your brand.

Secondly is the length of time it takes to move the 110 pieces. It can take from a week to 2 months or even more to move the whole bale. This again will depend on your location, target customers, marketing skills, competition and the quality of the items.

What is likely to happen after selling the best quality items you will be left with coats of average quality which sell slowly. To remain competitive and keep pleasing your customers you will be under pressure to restock with better quality items even before clearing each and every item of the bale. Hopefully by then you should have recovered the cost.

Thus a more realistic scenario is to know that not all items will be of the quality that you aim for. There will be items could be of much higher quality or lower.

If your target customers are the kind who will appreciate higher quality but without income to purchase at a higher price then you have to sell at the average price. The trick is to price the items in such a way that you recover your costs and make some profit.

From the example above let’s assume out of the 110 trench coats 20 are of extremely high quality, 55 are of average quality and, 15 are of passable quality, 10, of poor quality and the rest unsellable.

The 20 pieces you sell at Kshs.800 each, the 55 you sell at Ksh.500 each, 15 you sell at Kshs.300 and 10 you price at Kshs.100 and 10 you can’t sell.

If you sell everything then you will make Kshs. (20 x 800) + Kshs.(55 x500) + Kshs.(15 x300) + Kshs. (10 x 100) = Kshs.(16, 000 + 27500+4500+1000) = Kshs. 49000, resulting in a gross profit of Kshs.21, 000.

Still the qualities could be skewed differently so that you only have 10 of extremely high quality, 30 of average quality, 31 of passable quality, 22 of poor quality and 17 you can’t sell. In that case the revenue will be different.

Again you could have many of the high quality pieces but because your target customers are relatively low income earners you can’t sell at a premium but an average or below average price.

As we have mentioned above on the other end if you are targeting high end customers then you have to find another way to dispose the relatively low quality because if you display them at your shop they could water down your brand.

So there are those dynamics which can act in your favor or against if you are dealing with a bale.

Revenue Scenario Two (With Figures)

Now assume you have the same amount of money, Kshs. 28,000 but rather than purchase a bale you decide to purchase single trench coats which are second camera each at an average price of Kshs.300, then those will be about 93 trench coats. Now if you sell each at Kshs. 500 that will result in Kshs. (500 x 93) = Kshs. 46500, and a gross profit of Kshs. (46500 – 28000) = Kshs.18500. Of course there are related expenses such as transport, manpower and rent.

Though in this case the returns are lower when compared to purchasing a bale there are also advantages. The major plus being that you know exactly what you are purchasing. The element of risk and surprise that comes with purchasing a whole bale is reduced. You have quite a big control of what you purchase. Conversely you are in a more competitive sphere where competition for higher quality items is more intense.

The likelihood is that your stock will clear faster and you won’t be left with a lot of dead stock because you are purchasing the quantities you want and the qualities that customers are demanding or predict they need.

If you are targeting a general mass market and not very particular clientele then a bale will give better returns since you are able to discriminate in terms of price and clear all stock that is available.

So there are pros and cons of both bales and single items in terms of revenue. With bales the margins could be higher but so is the risk of losses and dead stock.

When purchasing single items there is more stability. But you have to compete more intensively with other retailers for quality clothes from suppliers. Sometimes you might not get what you are looking for or the standard quality your customers have come to identify you with. This will put you at a disadvantage.

It’s advisable not to start with bale if you are focusing on a very particular relatively higher end market. If focusing on general public and in a high traffic area you could experiment with bales.

Depending on your location and quality of items its possible not to sell even a single item in a day, same as it is possible a whole bale.

So how much can a mitumba dealer make? There are several kinds of mitumba retailers:

Hawking even a few items

Hawking slightly more items

Small stalls with low quality items

Stall with a mix of items

Stalls with high quality items

‘Refurbishes’ – Those who buy high quality mitumba items and pass them as new.

Freelancers who move from house to house

Freelancers who move from market to market

City hawkers

Rural market retailers

Major market retailers

High end shops

Online shops

The average margins across the board average 30%.

Margins range from as low as 10% to as highs as 200%. Higher quality items generate better margins.

Revenue Scenario Three ( With Figures)

Let’s look at another scenario. A wholesaler sells a bale of Plain T-Shirts at Kshs.15, 000. The bale he claims contains 220 to 250 pieces. Let’s work with a maximum of 250 pieces. Assuming you sell the t-shirts at Kshs.100 each. The total revenue will be Kshs. 25,000 (250 x 100) and the gross profit Kshs.25, 000 – Kshs.15, 000 = Kshs.10, 000.

If you sell at Kshs.150 each then that will amount to Kshs. 37,500 (250x150) n and gross margins of Kshs. 22500. (Kshs.37500 – Kshs.15, 000)

This again is an ideal situation where we assume that all the t-shirts are of the same quality. You could find that only 40 t-shirts can be sold at Kshs.100 each 30 can only fetch Kshs. 80, 15 can be value at Kshs. 60 and the rest, 15, Kshs. 50.

In this hypothetical scenario you will make Kshs. 4000 + Kshs.2400 + Kshs.900 + Kshs.750 = Kshs. 8050.

That will result in a loss of Kshs.15, 000 – Kshs. 8050 = Kshs. 6950.

The distribution could be skewed in any way.

With a reliable supplier who almost consistently provides you with good bales the returns will be above average. The challenge of course is to get such a reliable supplier. When targeting the mass market for instance in peri urban areas like county headquarters away from Nairobi, the risks of losses that come with a bale are reduced, since there are a variety of customers big enough to help absorb the whole bale.

To get a better idea of the revenue you are likely to make, here are some sample prices from different mitumba wholesalers

Sample Wholesale Prices

Item

Price ( Kshs)

Quantity ( Items

 

 

Approximate)

Children sweaters

12500

170-200

 

 

 

Baby Rummage ( Age 0-1yrs)

20000

400-450

 

 

 

Caps

22000

350-400

 

 

 

Baby Blankets/Duvets

17000

40-50

Mens corduroy Trousers

14000

120-130

 

 

 

Men polo T shirts

18000

200 - 250

 

 

 

Ties

18000

2800 - 3000

Duvets

18500

18-25

Bra Big and small sizes

28000

650 - 700

 

 

 

Jumpers

10000

90-110

 

 

 

Handbags

16000

80-100

Ladies Corduroy trousers

14000

100-120

 

 

 

Most average retailers in Gikomba sells 5- 6 bales in a week. There are those who are exceptions and could sell even 21 bales, while others will sell just two in a week.

Competition

Competition in the mitumba business is increasing at all levels. This is largely because of the low barriers to entry. With Kshs.1000 it’s possible to start a basic mitumba business operating from an informal location or informally by hawking.

Even at higher levels, bales and camera, the barriers to entry in terms of capital are relatively low. Location is a bigger barrier than capital. Location is extremely competitive in areas with location economies like Gikomba, market.

Still there are many opportunities and spaces where to set up a mitumba business.

There are also entrepreneurs selling mitumba through the internet without any physical location. They use free classifieds, online shops, Facebook groups and pages.

Suppliers are also becoming more accessible, unlike say five years where a level of connections and more effort were needed to get a trader who sells bales or camera. If Nairobi a trip to Gikomba was a must. Now some importers advertise in print and social media and are located in estates and even the central business district.

Competition in the business will continue increasing driven by low the barriers and as players across the chain becoming more accessible.

Demand for second hand clothes, especially high end and fashion items, is also increasing driven by the social pressure to stand out and be trendy no matter the income.

On What Is Competition Based On;

Quality

Quality is the first consideration when purchasing followed b y price. Thus if there are two mitumba dealers selling jeans trousers next to each other, the consumer will first go to the trader with the better quality jeans.

And if the price is above her budget then she will pick the next best quality but of a lower price. If the competition has better jeans or equally good she will enquire and if the price fits her money purchase.

So despite who the target market is, high, low general, etc quality in the buyer’s eyes is the first consideration. Keeping everything constant the higher the quality of clothes a retailer sells as compared to the competition the more the customers.

Location

Traders tend and try to establish in the most strategic of locations based on what they are selling. If you are in a better location as compared to the competition then your sales will be more.

Understanding of the market

Being in touch with your target market. If you understand the market then you are able to increase the chances of satisfying the consumer. This will result in more sales

Price

As much as consumers are looking for quality, they also consider price. And in an area with intensive competition and the same quality of goods the consumer will go for the fairest of prices.

Critical Success Factors

Reliable Suppliers

Good Location

Consistent quality

Fair Price

Understanding of the market

Opportunities and Survival

Opportunities exist in the Mitumba business at all levels. Competition is more intense at the retail as compared to other levels.

Outside major towns there is more opportunity to become a small time wholesaler who opens bales and resells to retailers. Or who purchases bales from bigger wholesalers and importers and sells to smaller wholesalers in satellite towns.

Survival in the business is based on the ability to avoid dead stock, understand what the market wants and locate in the best of places.

Among the reasons given by retailers who have closed are;

Losses – Largely due to poor quality items

Poor returns – Poor quality items

More profitable alternatives

Poor location

Unreliable employees

Misunderstanding the target market

Manpower

If you are not running the business fulltime you will need an assistant. Even in cases where you are available full time you will still need the occasional help say when you have to run errands.

In this business there are no set rules on how to reward manpower, and it depends on you and the worker. Various methods are available.

You can put the assistant on a daily wage, a monthly salary, salary and commission or purely commission. In some cases you set the standard price an item should cost and when the assistant sells above the price they keep the difference.

Commission based methods are preferred because you manage your costs better, and if there are no sales then you don’t have to pay a salary. Commission also motivates the workers. Still if for reasons beyond you or the assistant the sales are low they will be demotivated and possible quit. That’s why a small salary could be offered in addition to the commission.

A salary based method could make an assistant lethargic and not give her best. Often selling requires some sort of motivation.

Where the reward agreement is for them to give you a certain amount per item and to try selling the items at higher prices then the risks are lower. On the reverse this method could drive customers away. Those customers who want to purchase at what for you is a good enough price but which for the assistant is not good enough to help her make cash.

When the prices are not fixed the assistant will have room to skim some cash from you. There is not much you can do about this since receipts are not issued. Just be sure to price in such a way that you have a base that ensures you profitability.

A small salary and commission could be the best method when selling items of a value above Kshs.50.

Other then the person selling you could need someone to market what you have in a loud voice.

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