Nine out of 10 households in Kenya buy their grocery from what we call “Mama Mboga”. Mama mboga is your neighborhood grocer where you can go and buy your vegetables and fruits. The remaining 10% buys their groceries from supermarkets, and this population is mainly comprised of the middle and upper class. This article will therefore take you through how to start and run a successful grocery business in Kenya. It’s important to note that grocery businesses are dynamic, and may range from that small kiosk with Mama Mboga in it, to a relatively larger-scale business that sells to a larger population. Further, this business is not limited to women, as common perception dictates.
With that out of the way, let’s dive in on how to start and run a successful professional grocery business in Kenya.
How to get started
#1. Startup costs
Starting a grocery business in Kenya is relatively easy. This is because a grocery business requires very low capital to start and run.
Take for instance Faith Bosibori [name changed for privacy reasons] started her grocery business back in 2015, with only Ksh.200. She purchased a few tomatoes, Kales, onions and some Avocados and resold them at a profit, reinvested and repeated the cycle. She has since been doing the same and expanding her business which is currently sustaining her family.
Her advice to anyone who wants to start a business is not to despair, because even Ksh.100 will start the business. However, with the current economy, it’s only logical that you start the business with at least Ksh.1,000.
For a more professional-looking grocery store, a startup capital of Ksh.50,000 will suffice. Throughout the rest of this post, we will work with this figure.
Here is the breakdown;
#2. Rent a stall
Depending on the location you choose to set up your business, rent may vary. Nevertheless, you should set aside a monthly rental fee of Ksh.10,000.
Choose a location where families live, i.e., estates or in big markets. This will ensure that you have constant traffic converting into sales daily.
Groceries are perishable products and therefore, need to be fast-selling. If you choose a location with a low population, you will only make losses.
Small-scale grocery stores only require a business name registration that is only Ksh.950 at the e-citizen platform. This is as per the 2023 charge fees.
Apart from the license, you will also need to acquire an M-Pesa till number that will prevent your customers from footing transaction fees.
#4. Internal infrastructure and purchase of stock
Once you rent a stall/room for your grocery business in Kenya, you will need to build shelves or racks for holding your groceries, displaying them and storing them overnight.
Doing this will help you organize your stall, making it attractive and professional looking to your target customers. Here is a table with a breakdown of how you will spend:
|Expense Category||Estimated Cost Range (Ksh.)|
|Shelves/Racks||8,000 – 10,000|
|Storage Containers||3,000 – 5,000|
|Signage and Branding||2,000 – 3,000|
|Display Baskets and Bins||2,000 – 3,000|
|Lighting||2,000 – 3,000|
|Cash Register/POS System||1,000 – 3,000|
|Initial Stock||4,000 – 11,000|
|Miscellaneous||1,000 – 2,000|
Total Estimated Budget Range: 26,000 – 37,000 Ksh.
*Please note that these cost estimates are approximate and may vary depending on factors such as location, availability of materials, and personal preferences. Be sure to research and compare prices from different suppliers to get the best deals while maintaining quality.
For your initial stock as shown in the table above, here is the breakdown of what you will need to purchase for your startup:
|Category||Example Items||Estimated Cost Range (Ksh.)|
|Basic Food Staples||Rice, Wheat Flour, Sugar, Salt, Cooking Oil, Pulses, Spices||4,000 – 6,000|
|Fresh Produce – Fruits||Bananas, Apples, Oranges, Watermelons, Pineapples, Grapes||2,000 – 4,000|
|Fresh Produce – Vegetables||Tomatoes, Onions, Potatoes, Carrots, Cabbage, Spinach||2,000 – 4,000|
|TOTAL||8,000 – 14,000|
Where to purchase stock
For maximum profits, buying directly from the farmer is the best option. However, you will then have to sell to other smaller businesses, as you will have bought the different stock at wholesale.
On the other hand, if you intend to become a small-scale retailer, then buying your stock from markets or other large-scale retailers may be a very good option.
Avoid supermarkets as they often price their products higher than any other place.
Misconceptions about the grocery business in Kenya
- “It’s a Low-Profit Business”: While profit margins may not be extravagant, smart management and understanding customer needs can make a grocery store profitable.
- “It’s a Simple Business to Run”: Operating a successful grocery store demands careful planning, constant monitoring, and staying ahead of the competition.
- “Location Doesn’t Matter Much”: Location matters! Being close to customers ensures convenience and more foot traffic.
- “Only Basic Products are Needed”: Diversifying your product range with unique items attracts more customers and sets your store apart.
- “Customer Loyalty is Guaranteed”: Loyalty is earned through consistently excellent service and top-notch products.
- “Online Grocery Shopping Isn’t Necessary”: Embrace e-commerce to expand your reach and cater to modern customers.
Challenges faced by grocery businesses in Kenya
- Short shelf-life – Once you get into the grocery business, you will soon realize fruits and vegetables are extremely perishable. 48 hours into storage and you will have rotten products. Therefore, having a refrigeration system may help you curb losses. Further, fast-selling products in a high-population area will prevent losses
- Competition – You will always be competing with other grocery vendors in your location. Strive to provide the highest quality to attract new customers and retain old clients.
- Fluctuating Demand – Fruits are seasonal in production, and still, seasonal in demand. For instance, watermelons are rarely purchased in cold seasons and for you to maximize sales, you just have to have perfect timing.
- Rising Costs: Operating costs, including rent, utilities, employee wages, and raw materials, can be significant. As prices fluctuate, maintaining profitability becomes a continuous challenge.
Is a grocery store profitable in Kenya?
The profitability of grocery shops in Kenya can vary significantly depending on various factors, including the location, size of the store, competition, target market, management practices, and economic conditions. While some grocery shops can be profitable and thrive, others may face challenges and struggle to generate substantial profits.
To make a profit, you should understand the misconceptions and possible challenges you may face so that you can evade them.
What are some tips for managing and expanding your grocery business in Kenya?
There are several tips that can help you manage and expand your grocery business in Kenya. Firstly, it is essential to establish a clear understanding of your target market. This will enable you to stock the right products and set competitive prices.
Secondly, invest in marketing and advertising to increase your visibility and attract more customers.
Thirdly, focus on excellent customer service and building strong relationships with customers. This will help you retain existing customers and attract new ones through word-of-mouth recommendations.
Finally, consider diversifying your product range and exploring new revenue streams such as online sales and home deliveries. By implementing these tips, you can take your grocery business to the next level in Kenya.
As the grocery industry evolves, staying resilient, adaptive, and customer-focused will be the key to enduring success. With determination, creativity, and a commitment to excellence, entrepreneurs can transform their grocery stores into thriving hubs that not only meet customers’ daily needs but also contribute positively to their communities.