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Ideas & Debate

Informal economy untapped source of market intelligence

Mitumba (used clothes) sellers in Nairobi assist customers to pick items. Most Kenyans buy and sell in the informal economy. FILE PHOTO | NMG
Mitumba (used clothes) sellers in Nairobi assist customers to pick items. Most Kenyans buy and sell in the informal economy. FILE PHOTO | NMG 

The role of the informal economy or Micro and Small Enterprise (MSEs) in driving Kenya’s, indeed Africa’s, economy is increasingly being recognised.

The 2016 MSME survey by the Kenya National Bureau of Statistics revealed that the sector contributed about 34 per cent to GDP. Furthermore, about 90 per cent of employed Kenyans sit in the informal sector.

It is therefore a puzzle why this sector is not recognised as an expert reservoir of knowledge on purchasing habits as well as consumer and market intelligence in the country.

The reality is that most Kenyans buy and sell goods and services in the informal economy. A report on retail in Africa by Deloitte in 2015 indicated that about 90 per cent of retail purchases in Africa are conducted in the informal economy.

This must be partly informed by the fact that the sector knows how to continue to meet consumer demands and purchase preferences.  Informal businesses are good at deciphering and interpreting trends then creating goods and services that meet the demand.

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This indicates an intelligence not only in anticipating consumer needs but an innovation capacity that allows the sector to translate consumer desires in products available for sale.

An example of this is how furniture makers have foreign catalogues, magazines and pictures of furniture that they can replicate at a fraction of the cost for the domestic market.

There is often the misconception that the informal sector is only for low-income Kenyans; nothing could be further from the truth.

Middle-class Kenyans rely on the informal sector for everything from food, to fashion, furniture and fun.

Going to a local for a drink and meal is common, buying basic food items from the local kiosk is an everyday occurrence and going to markets to buy second-hand clothing is commonplace.

The informal sector is aware of the fact that consumer demand is informed by global trends and preferences. The ubiquitous nature of smart phones means that young people can see hot trends abroad and demand the same in the domestic markets.

Thus, informal businesses have to be able to quickly respond to trends and make hot items available locally. Again, this demonstrates a level of market knowledge in the sector that is often ignored and dismissed by most.

It can be argued that if you want scalable market intelligence to inform product development and marketing strategies, the informal economy is the best place to go. Informal retail vendors have a consistent history of responding to trends, anticipating consumer purchasing habits and converting formal and expensive retail items into something you can take home for yourself.

Sadly, most companies do not connect how their own purchases and spending habits are captured in a sector that is neglected statistically and in terms of market research.
Indeed, some companies even seem unaware of how they rely on the informal sector to push their own products and penetrate markets.

In short, informal businesses understand trends, customer preferences and purchase habits. They innovate to meet retail needs and ensure that consumer demands for goods and services are met affordably and consistently. They are likely the largest untapped reservoir of market intelligence in Africa.

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