‘Kadogo’ economy rules retail sector

Shoppers at a supermarket. PHOTO | JOSEPH KANYI | NMG

More than 70 percent of fast-moving-consumer goods (FMCG) purchases are of products priced below Sh55, indicating that the informal market, known as ‘Kadogo Economy’, is still king in Kenya.

This is according to findings by market insights firm Nielsen whose retail measurement report released yesterday indicates that traditional trade (kiosks and groceries) accounts for bulk of retail sector transactions.

“Most transactions in the retail sector are still below a dollar (Sh103) and this explains the growth of the traditional trade,” said Nielsen East Africa, Consumer Insights Lead, Pauline Achayo.

The traditional trade, according to Nielsen, accounted for 66.3 percent of the total FMCG spend in the year ending March 2019, a 10.7 percent growth when compared to a similar period the previous year.

Modern trade (supermarkets) accounted for 33.7 percent (Sh94.1 billion), a 0.4 percent growth over a similar period.

“Consumers are price-conscious and are looking for value but are willing to pay more for quality products, if they see perceived value in it. It is not just a pricing game anymore. Factors like convenience, availability, ease of shopping are some of the parameters that consumers are using to make shopping decisions,” she said.

The trend has in the recent past seen firms such as Proctor & Gamble (P&G) and Bidco launch small packages of products such as detergent and cooking fat.

Nielsen’s study also found that household needs accounted for about 82 percent of the total retail spend with flour, cooking oil, toiletries, milk products, diapers, non-bulk water, tea and sanitary essentials among goods flying off the shelves and accounting for Sh243.5 billion spend for 2018.

It also found that spending on fresh milk, cooking fat, spreads, cologne, concentrated juices had declined when compared to toiletries, UHT-milk, shoe polish, energy drinks and chocolate beverages.

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Note: The results are not exact but very close to the actual.