Barbara Gruehl Kipke
How to make the wheels go round
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In this section:
Bicycle Sales Outlets
Bicycle Rental
Bicycle Taxis
Bicycle Repair
11) Bicycle Sales Outlets
-Most wholesalers are of Indian origin with close ties to India. In Kenya, bicycle sales outlets are run by specialists whereas in Dar, bicycles are sold by retailers who sell one item one week and another product the next. It is much harder to gain commitment from the latter, who have no special interest in the bicycle as such. A market overview of all the bicycle sales outlets should be gathered- if the number of outlets is variable over time, this should be monitored.
-The bicycle sales outlets have a special role to play since they make a living out of supplying bicycles. It is conceivable that they could be convinced to have a "mobile" sales outlet in the pilot area or a "mobile" repair unit. If a number of bicycles were bought at the same time, a special rate could be negotiated with a bicycle sales outlet. The bicycle sales outlets might be convinced to offer a hire/purchase scheme.
-Although bicycle sales outlets lobby for the reduction of import duties, at least those who are importing illegally have an interest in keeping import duties in place because that is actually where the greatest margin can be earned!
-Somewhat lower quality bicycles is partially in the interest of bicycle dealers because they usually also have bicycle spare parts as part of their product line and actually earn higher margins on the spares.
Bicycle Sales Outlets in Morogoro:
General Impressions:
There is a lot of fragmented competition. Margins are low so that bicycles may even be "loss- leaders" to get customers to step inside and buy other products. More money is earned on spares. There are Indian, Arab and apparently one African bicycle retailer. Mainly Phoenix bicycles are sold with considerably fewer Avon bicycles being sold along with a number of 12-gear mountain bikes (Adams). There were absolutely no ladies bicycles that could be bought in Morogoro!! There were no Swala bicycles in Morogoro at the time. Only one retailer had a wide variety of bicycle types.
Some retailers sell "complete bicycles" including the light, the lock and a pump whereas other retailers prices are based on "bare-bones bicycles" that at least include a bell and a stand. The prices quoted are prices that were indicated without any bargaining. In fact, bargaining can reduce the price.
The bicycles are bought in Dar es Salaam completely-knocked-down (CKD) and assembled in Morogoro.
None of the bicycle dealers from Morogoro showed up for the bicycle suppliers luncheon at Morogoro Hotel! It will take some effort to get them on-board (refer to Appendix 2: Food for Thought).
BICYCLE SALES OUTLETS in Nairobi:
In Nairobi, the bicycle wholesalers formed a relatively cohesive group. This seems to have been attributable to the importing agency: Rimaki Agencies, Mr. Kotecha who could be called the "father of the bicycle business" (refer to "Special Report on Bicycles", Nov. 10, 1995 in Taifa Leo Appendix 11). In most cases the bicycle wholesale business has been passed on from father to son. Mr. Kotecha is one of the few who represents the older generation and in his role as an importing agency, he has done business with all the other wholesalers. Mr. Kotecha's role was stronger before liberalization. Now more wholesalers import directly.
KNTC used to have a monopoly position before liberalization. KNTC is now at a disadvantage because prices can not be reduced according to the market situation - KNTC purchased excessive numbers of bicycles when the Kenyan shilling was weaker.
Bicycle specialty shops are correctly saying they lay emphasis on quality products - to differentiate themselves from the low-quality hardware products.
Competition has become even stiffer at present because different businesses felt bicycles were a lucrative supplement to their normal business - bicycles were therefore added to an assortiment of textiles, household goods etc. thereby overflooding the bicycle market at present.
12) Bicycle Rental
-Bicycle rental seems to be a very interesting option for those who can not afford to buy a bicycle. Bicycle rental facilities can also facilitate the process of learning how to ride a bicycle. In different areas, rental outlets have served a different clientele. In Tamale, Ghana, adult men could rent a bicycle if they were known to the bicycle rental owner. In Nairobi and Dar there were a few rental locations where one could find childrens' bikes only and as can be guessed, it was children who rented them for the fun of it. Apparently in Morogoro, bicycles are only lent out with a driver until the person is known. It should be possible to expand the number of rental outlets and see if new types of rental customers can be reached.-Bicycle rental also has the advantage that bicycle maintenance can be ensured more easily. Furthermore, bicycle parking is bundled when the bicycles are not in use. -In Nairobi, people who were willing to rent a bicycle to work, expressed interest in a weekly or monthly rate20. The issue of collateral from the person renting has to be discussed with potential bicycle rental entrepreneurs .
-In Nairobi, one bicycle rental outlet had all of the childrens' bicycles stolen one night. That turned the table for that entrepreneur quickly - from a profitable endeavour to a losing proposition. It might be possible to consider an insurance scheme for bicycle rental outlets.
Dar es Salaam:
The number of bicycle hirers seem to have increased considerably since earlier visits. A lot of bicycle hirers are involved with bicycle repair as the other half of their business. Their indications are that they are earning about 3000 TS/day result from a mixed calculation including both repair and rental. King Sheba has had 8 bicycles stolen in a year (while he only has 3 rental bikes presently) while a rental outlet (Mr. Ramadhani Jaza) has had 3 bicycles stolen within a year and a half (out of 6 bicycles he rents out) but all those 3 bicycles have been recovered! The bicycle hirers report stolen bicycles to the police (the police stated that about 3 bicycles are stolen per month in Temeke). The rental rate is generally higher in Dar es Salaam than in Morogoro (ie. 100 TS/ 1/2 hour). ATB bicycles rent out for 200 TS/hour. Few or no women rent the bicycles. King Sheba doesn't rent out to women because he is worried about women getting the bicycles stolen easier while they are renting the bicycle. They leave the rental bicycles in their homes at night.
Morogoro:
Bicycle hirers earn quite good incomes. One hirer has 10 bicycles that he lends out at 50 TS per half hour and 100 TS per hour.Most hire in the 50-100 TS range. A bicycle hirer can earn 3000 TS/day in revenues. His 2 employees earn 10000 TS/month. Bicycle repairs are 2000 TS/bicycle/month.
| Revenue: | 3000 TS * 30 days = 90000 TS | |
| less Labour costs | 10000 TS * 2 = 20000 TS | |
| less Repair costs | 2000 TS * 10 = 20000 TS | |
| less Storage costs | ??? = | |
| Profit | approximately 50000 TS |
which is equivalent to approx. 1 bicycle per month profit.
Bicycle hiring is open from 7 a.m. to 18:00 every day including Sundays.
People hire who live in the area or work in the area. Risks:
- A bicycle hirers main risk is to have his bicycles stolen. If a bicycle is stolen, he reports it to the police.
13) Bicycle Taxis
Bicycle taxi services are well known in India. Boda-boda bicycle taxis also exist in Uganda. In both cases, one could say bicycle taxis are a form of bicycle rental but in this case including the driver (similar to Morogoro). They may be more expensive than mere bicycle rental, although the drivers may be able to achieve a higher level of utilisation of the vehicle by going to where the customers are, rather than waiting at a location for the customers to come to them (as is the case with bicycle rental).|
Box 8 BICYCLE TRANSPORTERS The bicycle transporters are a specialty of Eldoret. There are about 60 of them - 40 based at the main market and about another 20 at a smaller market within Eldoret. A bicycle transporter carried a sack with approx. 50 kg and some eggs for a distance of 3 or 4 kilometers and charged 40 KS. 50 KS is charged for carrying 100 kg. Often they earn 5-10 KS for a trip. 40-50 KS is more than a matatu charges! - but perhaps matatus don't travel to that location. Nevertheless, the bicycle transporters say they only earn between 100 to maximum 200 KS / day. The 40 transporters at the main market have formed an association with a bank account with 5000 KS savings. The chairman of the association has a picture on his bicycle with the inscription: Chairman on it. Bicycle transporters feel positively about their transport mode even though some of their bicycles are 10 years old. Some of them compete in bicycle races. The bicycle transporters explained why they do not ferry people to their destinations: due to the hills, there are sections where a potential customer would have to walk and that would make it embarassing to charge money when in the end the customer would have to walk anyways. Bicycle tires have a vital role for the bicycle transporters who prefer the so-called "Ugandan" tires that are actually Chinese "Diamond Superior" tires that come into Kenya illegally via Uganda in avoidance of the high duty. |
14) Bicycle Repair
Of course there has to be at least one bicycle repair outlet in each pilot area. To my knowledge, this is the case in our pilot areas (although there are areas in Nairobi where one can not find a bicycle repair shop anywhere). Even though there may be a bicycle repair shop, it is to be expected that when cycling becomes more popular, more bicycle repairers will be required. It is very important in my view to have qualified repairers who have the appropriate tools - they may have to go through further education to reach standard. It is obvious that sufficient quantities of bicycle spare parts have to be available for bicycle repairers to be able to do their job (this was not the case in Tanzania a number of years ago).Morogoro:
Bicycle repairers have already formed an association, whereas bicycle hirers have not. Bicycle repairers have no formal education as repairers (primary school leavers). They would like further education in order to be able to repair bicycles better. Bicycle repairers earn low incomes (400 TS * 30 days = 12000 TS ie. lower than the minimum wage!).
Bicycle repairers should be given help to improve their financial situation. The bicycle repairer association in Morogoro applied for a loan from SIDO, but the application seems to have gotten lost. When visiting SIDO, a reexamination of the bicycle repairers loan was requested. Most likely the loan request was in order to buy additional tools for their business. Bicycle repairers could improve their lot, if they got into the spare parts business (rather than requiring customers to obtain the spare parts themselves!). If they had the capital, getting into the bicycle hiring business would also be a more lucrative supplement to their business.
Eldoret:
The extent of the bicycle theft problem in Eldoret can be seen by Karim Hardware's requirement to be given proof of ownership before the bicycle is repaired. Bicycles that are not picked up the same day after repair, are charged a storage fee at Karim Hardware.
Mail to: Barbara Gruehl Kipke (barbara@mobility-consultant.com)
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