Nairobi Business Ventures MD Raj Srungarapu during the interview this month and one of the shops within the CBD. PHOTOS | DIANA NGILA / SALATON NJAU
What you need to know:
KShoe owners sell up to 6,000 pairs in a year to the upper middle class in Nairobi.
Vasu Abotula and Raj Srungarapu, the founders of a Nairobi shoe and leather accessory firm, say to survive and thrive don’t compete with a giant.
For them, the shoe business giant in the east African region is Bata. So, when they arrived at the decision to set up a shoe company, their strategy was to avoid the giant like the plague by raising the bar. That is how they went for a niche and are now happy seeing their footprints.
The owners of Nairobi Business Ventures (NBV) that operates six outlets in Nairobi (two in the CBD and one each at Village Market, T-Mall, Capital Centre and Ongata Rongai) under the KShoe brand are focused on the upper middle class.
They sell a pair of shoes at an average Sh12,000, not between Sh3,000 and Sh4,000 like the bulk of stockists. “In this business, do not compete with a giant by stocking shoes in their price range of Sh3,000 and Sh4,000,” says Mr Abotula.
“Our target market has changed to the upper middle class,” he added, saying that the average price of their shoes is Sh12,000.
The duo worked together for four years in senior management at a Nairobi printing solutions firm before they ventured into the shoe selling business in March 2012.
Mr Abotula, 51, and Mr Srungarapu, 44, started with imports as a wholesale.
“Setting up the business was not easy. The retailers wanted to dictate the terms of trade and made a lot of demands, especially on pricing,” said Mr Srungarapu.
“Some of the bigger retailers insisted that after stocking, whatever was sold was what would be considered, and some were also importing the same kinds of shoes we were supplying.”
Head-to-head competition
Their first big contract was a distributorship contract with Deacons in May 2012.
A month later, the owners of Village Market offered the duo space at their upmarket shopping centre and, with Sh2 million in seed capital, the KShoe brand was born.
NBV plans to open at least five outlets per year and listing on the Nairobi Securities Exchange’s SME segment, offloading 15 per cent of equity and later a rights issue.
In the year to March 2015, the shoe seller’s revenues hit Sh74 million, selling between 5,000 and 6,000 pairs annually. They want to raise this to Sh90 million this year.
“When selling our product to retailers, we realised that there was a lot of demand in the retail sector and we decided to have our own shop,” said Mr Srungarapu.
By end of 2012, they bought out three outlets formerly operated by a Pakistani multinational shoe company Servis. Listed on the Karachi Stock Exchange, the Servis Group opened shop in Nairobi in October 2010 but exited two years later after failing to break the regional dominance of Bata.
KShoe learned from Servis’ missteps, the duo says, insisting they are targeting a different market from Bata’s and not competing with them as the Pakistani firm did.
Servis stocked school shoes, canvas, boots and slippers, at a price range that put it in a head-to-head battle for market share with Bata.
NBV started off with 24 employees, growing to 36 today. Of the two founders, only Mr Abotula had experience in leather products.
Soon after moving to Kenya from India 15 years ago, Mr Abotula, a chartered accountant and lawyer, landed a job at Alpharama Limited, a leather tannery in Athi River.
He worked as a financial controller and, after six years, moved to Mombasa Salt Works Ltd as a general manager and later to Kensta Group where he was the finance and administration manager.
Mr Srungarapu, a marketing professional, joined Kensta Group in 2002, rising to become the general manager for sales and marketing. He had for three years worked as a marketing executive at an Indian printing firm, Technova Imaging Systems.
It was at Kensta where the idea of a shoe business was born and they resigned.
Significant investment
It also took NBV more than a year to clear the more than 20,000 pairs of shoes inherited from Servis. Mr Srungarapu says it took this long because they were in Bata’s price range.
The company’s medium term goal is to set up a leather manufacturing facility in Athi River once the 500-acre leather industrial park planned in Machakos becomes operational.
In the next two years, they plan to make accessories like wallets and handbags and later shoes.
Initially targeting 1,000 pairs a day, the shoe factory, Mr Srungarapu says, will cost at least Sh600 million to construct while the budget for accessories plant is Sh200 million.
This significant investment is the main reason that NBV is seeking to list on the NSE and raise funds.
The entrepreneurs have applied for two spaces at the leather park, which should be operational in the next two years.
Owned by 25 shareholders through private placement, the company will likely become the fifth to list on the GEMS segment after Home Afrika, Flame Tree Group, Kurwitu Ventures and Atlas African Industries Limited.
