Example Two


Below is a long excerpt of the version one of the Motorcycle Spare Parts Retail business guide and does not entail the full report. Each guide contains parameters and information that is important to it. Have a look then make your order here.
 

                             Bodaboda (Motorcycle) Spare Parts Retail Business Guide

                                                          


Overview
This guide focuses on the retail of motorcycle spare parts those in the bodaboda business. It contains some few notes on the wholesale aspect of the business.

Growth, decline or policies affecting the bodaboda sector will affect the business in one way or another.

 The Bigger Picture
As of December 2013 there was an estimated 800,000 registered motorcycles. In 2005 there were 3,759. Then in 2008 the government zero rated motorcycles below 250cc in 2008 and in 2009 the number jumped to 91,151 motorcycles.... ( More in the survey)


Other Positive Indicators
Honda Motor Company has set up a local assembly line with a capacity of 25,000 units per year, and which started operating in December 2013.
Car and General which had been importing and distributing TVS motorcycles from India, and Suzuki parts from Japan set up an assembly factory in Nakuru with a capacity of 70,000 units. 

In December 2013 Toyota Kenya introduced a scheme called Crux Finance
. ( More in the survey)

Negative Policy trends


Many county authorities are trying to formulate ways to regulate the bodaboda. This is by increased taxes, zoning which restricts operators to certain areas only and hours of operation. . ( More in the survey)

Motorcycle Parts Tax

In August 2013 the government declared that it would increase tax on motorcycle parts from 15% to 25 %, same as that of complete motorcycles. Only parts manufactured within East Africa were to be exempt. This was an East African Community policy aimed at encouraging the use of locally manufactured parts by motorcycle assemblers in the country.This

In September 2014 the ministry of East Africa Cooperation lobbied and the implementation of tax was postponed for a not very well defined time. The argument among manufactures assembling locally was that locally made parts are of low quality. . ( More in the guide)




            Capital, Process & Equipment

Stock



Stocking is done based on location insights gathered by the entrepreneur. 


First is to identify the most common types of motorcycles in the area. Generally the two major classes are what those in the business call CGs which means Chinese Generation, and Indian models. Chinese models include Skygo, Yamahana, Flyboy, Tiger and Keweseki among others while Indian common models include Focin , Boxer, Hero, TVS and some others. There are also Japanese models like Suzuki, Kawasaki and Yamaha Mate. 


Though there are many spare parts that are universal such as spokes, bulbs, break fluids, roller chains, tires, break switch, tubes, stand springs and the like most parts are made specifically for particular brands.


Outside Nairobi there tends to be a dominating model/brand. For example Nyeri has moved towards Focin. Kisumu used to be dominated by Yamaha though that has changed to Chinese models. In some towns you will find bodabodas plying a particular largely made of one brand. A little further in Uganda they don’t trust Chinese models and the Indian motorcycles dominate, a taste which for sometime had been transferred to Western Kenyan though Chinese models have now made headway.
The brand taste is largely a function of the dealers, and the influence of early adopters. 

The local trends are not permanent and can change depending on what is pushed to the market. However the brand leading in a particular market say at this moment will be in circulation for about 2 years because of a vibrant second hand bodaboda market.
In Nairobi there is a high number of bodaboda operators and thus most brands are well represented. However if setting up in an estate its important to confirm if any particular brand is dominating. 


Information about which brands are popular in a certain area can be gotten from local mechanics or riders. There is no market that is dominated 100% by one model, however knowing the leading models helps one stock intelligently especially if with limited capital. 


Secondly it’s important to know which brands of parts are trusted or popular in the particular area, for example Yog, MSR, Avon, Railin and more. To be clear these are not motorcycle brands rather the brands of particular parts like clutches, brakes, tires and so forth. 


Again brand trust is a consequence of the influence of early adopters, and the leading wholesalers and retailers. The trust is less about price and say quality rather what could be referred as ‘culture/loyalty” in an area. Even if the preferred model is of low quality customers will ask for it simply because that is what that market has confidence in. This kind of information can be acquired from riders, and mechanics.


There is a debate in the market about which models between the Chinese and Indian are better. One side has it that Indian bodaboda models break down more often. Parts which originate from India are more affordable but a section of the market maintains they are of relatively poor quality, last for a shorter duration as compared to the Chinese. 


There have been cases where shops selling low priced Indian parts have been accused by customers of selling fake parts. Such a reputation drives away customers.
On the other side are those who say Chinese parts and brands are expensive. However compared to Indian models there are relatively fewer complaints about quality.


With enough capital one can stock a variety of the major brands; otherwise a potential retailer can use the market information to stock shrewdly so as to avoid tying capital in dead stock.
See Revenue for fast moving items, Suppliers, wholesale and retail prices of some of the items.

Licenses
The County Government business permit is the only license required to run a motorcycle spares shop. The cost varies from county to county but averages between Kshs.3, 000 to Kshs.10, 000 depending on size, and particular location within the county.



Capital
There are motorcycle parts shops which have been started with a capital of Kshs.100, 000, while others have had as much as 2 million invested for a retail and wholesale operation.
An ideal minimum capital would be about Kshs.300, 000. This is enough to purchase a variety of the most crucial and fast moving parts. Other considerations include rent, branding, licenses and staff.  ( More in the survey) 


                        Revenue

Before looking at the Revenue trends here are the average wholesale and retail prices of some items. As stated above there are various brands of the products, say Avon, Yog, MTR and many more. The prices vary depending on the source, strength, popularity and perceived quality of the brand.

The prices below are for a shop located in a Nakuru residential. The owner sources about 30 % from Yog Motorcycles in Nairobi, 10% from wholesalers in Nakuru and 60% from suppliers in Uganda.








Item
Wholesale Price (Kshs.)
Retail (Kshs.)
Spark Plugs
 32
 100
Brake shoe
96
 200
Piston rings
 100
 400
Bulb
 30
 100
Tubes
 210
350
Engine Valve
 89
 300
Clutch Plates
 107
 350
D/Switches
 357
 800
Break Springs
 10
 50
Full Gasket
 107
 600


Now here are the prices for the same items for a shop located in a relatively small town in Kirinyaga. There are 4 other motorcycle spare parts shops in the area serving about 130 motorcycles. The owner sources 100 % from a wholesaler in Embu town.





Item
Wholesale Price (Kshs.)
Retail (Kshs.)
Spark Plugs
 45
 70
Brake shoe
 150
Piston rings
 90
 210
Bulb
 30
 80
Tubes
 300
Engine Valve
 100
 250
Clutch Plates
 120
 260
D/Switches
 400
 600
Break Springs
 10
 50
Full Gasket
 150
 400


And here are prices for a small shop motorcycle shop somewhere in Kahawa, Nairobi. The shop is located in an area with about 60 motorcycles. The owner sources from wholesalers along River Road and Industrial Area, Nairobi.


Item
Wholesale Price
Retail Price
Battery
 2300
Brakes
 750
 1000
Mudguard
 190
 360
Petrol tank lock
 900
 1150
Backlight Screw
 450
 600
24 teeth gear alloy steel
 550
 750


Revenue Averages


Average Margins 
30%
Margin Range
15% - 400%
Average Daily Revenue
Lowest Daily Revenue Recorded
900
Highest Daily Revenue Recorded
Average Bodaboda Monthly Spend on Maintenance
Kshs.1250
Average Daily Bodaboda Income ( Urban Center)
Kshs.1100.
Average Daily Bodaboda Income ( Rural)
Kshs.600



(More in the survey)

The average daily Revenue is for county and divisional headquarters. And could appropriately apply to any urban area where there is one retail shop for every 85 motorcycles.

Retail prices are determined by what is prevailing in the particular market. Margins are not fixed and in some cases could be as high as 400 %. Margins are largely determined by source of supplies, competition and how efficient the business is.


Fast Moving Items

Among the fastest moving items are:

    • Tires
    • Tubes
    • Rims
    • Side Mirrors
    • Break Shoes
    • Indicator Lamps
    • Spark Plugs
    • Front & Rear Sprockets
    • Engine oil
    • Cables
    • Return Springs
    • Head Cases
    • Dimmer Switches
    • Side Mirror Holder


On average a bodaboda will replace a tire every 5 months. Five months can seem long until you consider that every month there will be bodaboda(s) joining the trade, so every day it will be five months for a substantial number of operators. Depending on the infrastructure and driving habits of individual riders the rate can be higher.

Though generally the most popular items are same across most of the country, there may be small differences for instance based on the terrain, driving culture, authorities, most common brands, customer economic and social activities.

Terrain and customer activity affect the wear and tear of the motorcycles. Bodabodas plying market routes are likely to carry relatively heavier loads meaning shocks and rims will be replaced more often.

If the roads are rough then it means there will be more damages to various parts. Same happens in areas where as a culture riders are careless.

There are motorcycles brands which wear out faster than others or have problematic parts which have to be replaced more often.

Also if the authorities are strict then owners will aim at keeping their bodaboda in a good condition which means they will invest more in maintenance.

Break Even Point

The break even point averages 4 months. This will be a function of the marketing effort, margins, and the competition in the area.

How Customers Make Purchases

For parts like tires, mirrors, rims and even shock absorbers bodaboda riders are able to see or feel when they need replacement. In such a case they purchase the items then take to the mechanics to fit. Some riders have developed basic maintenance skills and are able to fix parts like tires or mirrors.

For more technical breakdowns riders take the motorcycles to mechanics for diagnosis. If the mechanic tells a rider to buy this or that part a big percentage of riders will prefer to go purchase the part themselves then give the mechanic to fix. Sometimes if unsure a rider will ask a mechanic to accompany him to a parts shop.

There exists suspicion among riders that if mechanics purchases parts on their behalf they will hike the price, or go for lower quality items. On the other hand some riders trust the mechanic to identify fake and genuine products and get the right part at the right price.

Some mechanics will recommend particular retailers based on their relationship, prices and quality. Therefore it’s a plus to develop good working relationships with mechanics.

Revenue, Margins and hence Profit is influenced by:


Suppliers

The variation in prices between different wholesalers could be as much as 200% depending on their capacity, competition in the area, how they judge the customer, their sources and even how they navigate customs. Upcountry wholesalers are more expensive as compared to those in Nairobi.

The only way to get the best deal is to move from one wholesaler to other comparing prices. Often there will be room for negotiations and quantity discounts.

It’s important to know the prevailing retail prices within the area you wish to operate from. This way you are able to gauge whether the prices being offered by the particular wholesaler are favorable. A rule of the thumb is to add 20 % to the wholesale price to get a rough idea of what you will sell the item. 

In Nairobi the highest concentration of wholesalers is located along Luthuli Avenue, adjacent parts of River Road, Nyamakima, Kirinyaga Road and Industrial Area. Some wholesalers specialize for instance in Indian motorcycles while others only handle Chinese parts.

There are many counterfeit products in the market. Usually these imitate well known parts brands like MTR, Raicillin, and YOG among others..... (More in the Survey)

Uganda

The Uganda bodaboda market is matured as compared to the Kenyan market which is about 7 years old. This means motorcycle spare parts dealers in Uganda have gathered enough knowledge and experiences to help develop supply efficiencies and relationships which enable them to source more competitively.

Nonetheless what makes Uganda even more competitive are the relatively lower taxes charged by the Ugandan government which enables parts dealers to offer lower prices. Differences with average Kenyan prices range between 10% & 200% depending on the product and the wholesaler in Kampala.

Price advantages in Uganda must also be considered in terms of related expenses such as travel, accommodation, and possible custom charges at the border. A round trip to Kampala from Nairobi will average Kshs. 5,000, while standard accommodation starts from Kshs.1000..... ( More in the survey )

Wholesalers

There are many wholesalers all over but here is a list of a few reputable ones to start you of:




Supplier
Location
Minimum Purchase
Yog Motorcycles
Nairobi, Luthuli Avenue
Kampala
Kshs.30,000

There are many fake Yog products in the market, so its good to be cautious if you are not purchasing from them directly
J & L
Kampala Nabugabo Rd. Gate No.1, Shop No. N10 N11 Ggawala Shawuliyako
Nairobi
If physically present in Uganda, the minimum purchase is Kshs.20, 000. If purchasing by M-pesa/bank transfer and so that the goods are sent to a location in Kenya the minimum is Kshs.50, 000. You have also to pay for transport charges.
The minimum in Nairobi is Kshs.30,000
Renevox Agencies
Renevox Agencies
Othaya / KIrinyaga Road - Pasonic Hotel Mwea
Opposite Equity Bank,
Nairobi, Kenya.

Renovex Agencies near Nyayo Stadium, Foton
Trucks Building, Uhuru Highway.
Minimum is about Kshs.20,000
Samawati Traders
Jeizen House
Luthuli/ River Road Junction
0727 119536
No exact minimum. Initially 5 pieces and above could earn a retailer a wholesale price. They also offer quantity discounts
Others
In every major town there are a number of major wholesalers. For instance Rem G in Kisii, Adventure Technology in Kisumu, Nakuru, Kisii, Issa Adam Embu
The minimum varies. Upcountry the minimum amount is on the low and can be as little as Kshs.5000

 


(More in the full guide)


Mechanics & Marketing

Marketing efforts aimed at making the bodaboda defect from where they purchase presently have an impact on Revenue. Since in most areas bodaboda operate from a common pool, winning a few riders will help spread word to the rest.

A very effective strategy used by some spare parts shop is to position a mechanic outside the shop. The mechanic can be independent or an employee of the shop owner. In the latter case the owner can direct the mechanic to do minor maintenance work free of charge, but only if a rider has purchased a part from his shop. Many riders appreciate the free service.

Often mechanics tend to have a faithful customer base. Thus when they move to a different area, their customers move with them too. Because of this some shop owners ‘poach’ mechanics from nearby areas to come work next to their shops. Shop owners give incentives of cash, rent free space, profit sharing or other terms favorable enough to make the mechanic defect. The assumption is that the mechanic will recommend the shop and the riders will become faithful customers.

Retailers who are able to form positive relationships with mechanics record higher sale since mechanics still carry a lot of weight in purchase parts purchase decisions.

 

( So much more on Revenue )

 

 

                Competition & Survival



Nairobi CBD
County Headquarters
Divisional Headquarters
Estates
No of motorcycle spare parts shops
102
11
7
3
No of shops that have opened up in the last 1 year
26%
31%
41%
56%
No of shops that have shut down in the last 1 year
11%
5 %
14%
21%


    • Base period: January . Sample shops in Rift Valley, Central, Nyanza,Western, Eastern, Mombasa & Nairobi
    • Initially motorcycle parts shops were only in the major towns but now they are trickling down to estates and small centers
    • No of shops that have closed is higher in the small centers where the market cant sustain more than a few shops

 

 

Random Observations

    • Along Nairobis Luthuli Avenue and River Road 6 shops were recorded to have shifted from selling other wares; electronics, electrical items, and mobile phones to motorcycle parts. This is since December 2012
    • The percentage of motorcycle parts businesses for sale is low as compared to other businesses. This data is derived from advertisements in newspaper classifieds, online forums and business brokers.

 

- Status of Competition

 

- Opportunities & Survival 

 

Critical Success Factor

Assuming that all the retailers in a location understand the market proper and have stocked the products in demand in the particular locality, and then the Critical Success Factor in the business is price, and then quality.

Even if the business is operating from the most prime of locations but the price is above average as compared to rivals within the same locality then the consumers will opt for lower priced competitors within the same area. The primary goal of bodaboda riders is profits. Thus they will aim to keep their costs down so as to maximize profit. 

Low price is relative. A retailer in Nakuru can sell an item that costs Kshs.100 in Nairobi for Kshs.140, but still be considered low compared to another shop within the locality selling the same item at Kshs.150.

Price is also tied to source of supplies. If one is able to source cheaply but still sell at the same price as other players in the market then he will enjoy higher margins and increase his possibility of expanding faster.

High quality parts last longer compared to low quality. Quality often has to do with whether the product is counterfeit or not.

A business selling parts at relatively low prices (low price in terms of the market he is operating from) is more likely to survive and flourish in the market than one selling at higher prices. A mix of a fair price and high quality offers the best chance of success in the business

 

- What is Competition based on ?

- Differntiation 

- Tricks

(More on competition in the survey)

Consumer Behavior

About 35% of the bodabodas on the road are not owned by the people riding them, rather the riders are employees who have gotten into some sort of contract with the owner. The contracts often are of the nature that the rider remits a certain fixed amount everyday to the owner. The rider takes care of the maintenance. This means there is a strong incentive to keep costs as low as possible so as to meet targets and maximize returns.

The bodaboda rider also wants to keep his motorbike on the road as long as possible. He doesn’t want to spend too much time in the garage. Thus as mentioned he will be keen on price and quality. Price doesn’t necessary mean the lowest amount but value for money. There are many bodaboda riders who are ready to pay a premium price for quality.

Choice of where to buy parts is first and foremost influenced by.... (More in the guide)

 

 

   Manpower



Average no of Employees
 2
Average Education of Employees
KCSE
Average Salary of Employees
Kshs.8000
Labor Turnover
 7 Months


Among motorcycle shop owners the major consideration when recruiting is a good understanding of spare parts on the part of the candidate. In many cases the employees learn the fine details on the job.

Recruitment is mainly by word of mouth, among friends, family and even bodaboda riders. It is common to recruit employees with low skills then train them.

Employees with personal interest in mechanics, vehicles or technology are preferred since they learn faster and are able to make technical suggestions to customers.

There are many times when customers want the honest opinion of the shop attendant, and if he or she is not skilled he can not give a useful opinion.

 

..........In places where competition is intense it’s common for employees to act as brokers... (More in the guide)

  

  • Capital Breakdown

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