Example Two: Motorcycle Spare Parts | Crack A Business Kenya - Don't Invest Blindly !

Example Two: Motorcycle Spare Parts


Below is a long excerpt of the Motorcycle Spare Parts Retail business guide. This is a 2020 / 2021 edition. It contains: 

  • Overview       
  • The Bigger Picture     
  • Number of Motorcycles Registered       
  • Value of the Boda Boda Industry: Income and Support     
  • Market Observations: Negative& Positive
  • The Boda Boda Parts Chain       
  • The Importers   
  • Classification of Importers     
  • Importers as Wholesalers       
  • Tier Two Wholesalers   
  • Retailers       
  • Stocking       
  • Types of Parts 
  • The Various Spare Parts
  • Fast moving parts
  • Where do you get the parts?     
  • The Uganda Option       
  • Key Operations 
  • Premises       
  • Revenue
  • Pricing
  • Wholesale & Retail Prices: Sample       
  • Margins
  • Revenue: Case Study One
  • Revenue: Case Study Two
  • Financial projections
  • Factors Affecting Sales & Revenue       
  • Pull factor     
  • Customer Service       
  • Mechanics, Marketing & Revenue 
  • Pricing
  • Competition     
  • Sales Skills   
  • Loyalty
  • A note on Return Policy
  • Competition     
  • Opportunities & Survival       
  • Critical Success Factors       
  • What Is Competition Based On?   
  • Consumer Behaviour     
  • Licenses       
  • Capital Breakdown       
  • Starting: Main Steps




 

                             Bodaboda (Motorcycle) Spare Parts Retail Business Guide

                                                          

Overview

This guide focuses on the retail of motorcycle spare parts to those in the boda boda business. The basic premise is that boda bodas wear and tear, in addition to getting into accidents. Hence there is demand for replacement parts.

 Interest in the boda boda parts business is often based on anecdotal evidence in growth in their numbers; just looking around there are more boda bodas than say two years ago. More so they have filtered to all areas of the country. They can’t be cornered into usual groupings of rural or urban, low or middle class; they are the real mass market means of transport. 

Policies affecting the boda boda sector, its growth and decline will also affect the motorcycle spare parts retail business.

On the face of it things look rosy for the boda boda sectors, which includes not just the riders but the supporting industry as well; both on the upper and lower sides of the chain. Their embedding into the economy and politics of the country has ensured so. This to an extent that their nuisance value is conveniently ignored or tolerated; as if it’s part of life. Perhaps it is.


The Bigger Picture


The number of motorcycles on Kenyan roads directly impacts the boda boda spare parts business.

The number of motorcycles in Kenya was growing in a linear lazy manner until 2008, when the government zero rate motorcycles below 250cc. From then on growth in numbers became geometrical.

Let us look at the motorcycle registration figures since 2005.

 

Year

No. of Motorcycles Registered

2005

3,759

2006

6,250

2007

16,923

2008

51,412

2009

91,151

2010

117,266

2011

140,215

2012

93,970

2013

125,018

2014

111,124

2015

134,645

2016

119,724

2017

186,434

2018

188,994

2019

210,103

Total

1,596,358



Value of the Boda Boda Industry: Income and Support

So if all motorcycles registered between 2005 and 2019 are on the road then it means there are at least 1,596,358 motorcycles on the roads. However, not all are active. Some have been retired by the owners for various reasons while others have been involved in accidents. We estimate, based on number of accidents, this to be about 16% of the total, on the higher side, which translates to 255,417 motorcycles. This means there could at least  active1,149,378 motorcycles.

Not all motorcycles are used as boda bodas, however a majority (88 % by our estimate) are. This equals to 1,011,453 motorcycles.  Going by a combined rural and urban daily average revenue of Kshs.700 (This is an average based on our sampling. There are those who make more or less. We are also conscious of the boda boda officials who throw around Kshs. 1000 as the national daily boda revenue average; from our research that’s abit colorful, so we’ll stick to the duller figure of Kshs.700), then the total revenue from the sector is Kshs.708,016,848 per day. Quite high, right…

 

With such a value then repair and maintenance of motorcycles becomes a key sub sector.

Further, conversations with riders showed the average spend on maintenance is Kshs.1200 per month. If we consider the number of active boda bodas, and the average spend on the same  then repair and maintenance alone worth  at least Kshs. 1,213,743,600. Mouth watering indeed.......

Much more in the guide.....Get it @ an offer price of Kshs.599 . Better still enjoy our offer of 66 guides @ Kshs.999. Valid today.

Make payment via Lipa na Mpesa - Buy Goods & Services - Till no. 876313 then text/Whatsapp  your email address to 0712 473 455. We will deliver within 15 minutes. 


Market Observations: Negative& Positive

 

Positive

Negative

 

Honda Motor Company 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 distributors of TVS motorcycles from India, and Suzuki parts from Japan set up an assembly factory in Nakuru with a capacity of 70,000 units.

 

Toyota Kenya once introduced a scheme called Crux Finance which enables more motorcycle riders to own motorcycles by pooling in resources.

 

At least 31 schemes providing credit facilities for purchase of motorcycles through daily or weekly remittances over periods some long as 12 months.

 

County government Efforts to regulate the boda boda business by increased taxes, zoning which restricts operators to certain areas, limiting the hours of operation and such other.

 

National Transport and Safety Authority (NTSA) efforts to implement regulations governing the operations of bodaboda. This in terms of skills of riders, amount of cargo they can carry, registration and conditions of the motorcycles.

 

Nothing much has come out of the regulation efforts because of the political and economic reasons we mentioned previously. However, an arrogance, holier than though attitude, a love for risk, a happy go lucky stance, my way or nothing else road manners and crime acts of some riders maybe their undoing. As much as their negative is tolerated this could encourage them to go beyond the tolerance level, do something extreme , and all the positive they bring to the table will pale to their negative actions resulting into some drastic regulatory actions.

Meanwhile the situations favour them, and as the next election nears in 2022, nothing drastic if implemented will last. Who dare upset all those votes?

At the boda boda parts entrepreneur has little to worry about the banning of her customers. You know unless they push it to the very extreme.

Get it @ an offer price of Kshs.599. Better still enjoy our offer of 66 guides @ Kshs.999.   Valid today.

Make payment via Lipa na Mpesa - Buy Goods & Services - Till no. 876313 then text/Whatsapp  your email address to 0712 473 455. We will deliver within 15 minutes. 

The Boda Boda Parts Chain

Broadly the supply chain of boda boda parts in Kenya takes the form below




    

Much more in the complete guide..... 

The Importers

Almost, 94% if  all motorcycle spare parts sold in Kenya are imported. The main sources are India and China in line with the origin of most of the motorcyles on Kenyan roads.

Unlike say pre
2016 importation of motorcycles has attracted tens and tens entrepreneurs seeking to play higher in the value chain, where there are volumes and possibly better margins.

 The result is that competition even among importers has increasingly become intense, well to the advantage of the retailer. The offhand manner in which some importers and wholesalers used to treat retailers has been replaced by sweet talking salesmanship.

The entry into the market of well capitalized Chinese investors with networks in their mother country have further heightened competition. 


Importers can be classified in various ways.

By Setup - On one hand we have the formal corporate organizations with some sort of exclusive distribution agreements of parts or parts and cycles. For instance Car and General with respect to original Bajaj and TVS.

On the other are the independents, individual businesses importing a variety of parts of various brands.

By Size - This as measured by their capacity. There are large importers, who can bring in parts worth tens of millions, the medium and the small. Size isn't just about capital but also ability to move the products in the market.

By Business Model - On one end we have importers bringing in generic parts branded by the manufacturers. While on the other are those who custom brand...... 
Much more in the complete guide.....

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Importers as Wholesalers
All importers are wholesalers but not all wholesalers are importers.


For importers retailers are the main sales channels. There is minimum barriers to the retailer accessing the importer and vice versa. Increasing competition among the importers cum large wholesalers has minimized any friction.

The expected friction are first minimum quantities

Much more in the complete guide..... Get it @ Kshs.599 or 66 guides @ Kshs.999


Tier Two Wholesalers

Away from the importers are also what we could refer as tier two wholesalers. These are not importers. They buy from importers then sell to retailers.  There are several types of these. The terms offered by importers also vary.  


There are wholesalers who just walk to importers...Much much more in the complete guide

 
Blue label importers ....... 
Much more in the complete guide.....



Stocking

Types of Parts

Let’s understand the various types of parts before we get deeper into stocking:

Motorcycle parts can be broadly grouped in several ways:

Brand specific parts - These are parts particularly made for specific kind of cycle brands. They can't be used on other brands. For instance Skygo specific parts which can't be used on Boxer. A Boxer block is a Boxer block and can't be used on Skygo.

Universal parts - These are parts that can be used on any motorcycle irrespective of brand. For example brake fluids.

Original parts ..
Much more in the complete guide..... 

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Deciding What To Stock: Key Steps

How then do you decide what to stock?



1. Identify the make or brand of motorcycles available in your ...
Much much more in the complete guide..... 

There are tens of motorcycle parts. To get you started, below is a list of common items. Note this is not a list of fast moving items but the common

 

We will include prices in the revenue section of the guide:

·         ACC CABLE

·         ACC PIPE

·         AIR CLEANER

·         BALL RACE

·         BATTERY

·         BLOCK GASKET

·         BRAKE ARM

·         BRAKE CABLE

·         BRAKE PEDAL

·         BRAKE ROD

·         BRAKE SHOE

·         BRAKE SPRING

·         BULB HOLDER 

MMany more in the complete guide.....including fast moving items ....

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Where do you get the parts?

We covered part of it in previous sections. However to get into a few specifics here are some contacts. Usually many are able to send parts to various parts of the country. But it also helps to make the initial visit.

 

 

 

Supplier

Notes

Contacts

Mamba Motorcycle Spare Parts

Wide range of parts. Great customer service.


Janluck Boda Parts



Ammark Brand




Many more suppliers in the guide

Many more suppliers in the guideMany more suppliers in the guide

 

 


 

 

 


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 Valid today.

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The Uganda Option

The Uganda bodaboda market is mature and older as compared to the Kenyan market. 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. For years differences with average Kenyan prices ranged between 10% & 200% depending on the product and the wholesaler in Kampala...Much more in the complete guide..... 

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Key Operations


A cycle spare parts shop is a pretty straight forward operation.  The main activities are;

 

 

Activity

Details

Requirements

Sourcing



Stock tracking





More activities in the guide

More activities in the guide

More activities in the guide







 

 

 

 

 

 


Much more in the complete guide.....

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Premises

Most spare parts are not bulky, although there are those like tyres which occupy space. This means that a spare parts shop can operate from a relatively small space. But you need to have enough space to work, and cater for growth. You don't want to start moving when you have built a consumer base because of size of premises.

Ideally the premises should be located in a strategic...
Much more in the complete guide.....

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Revenue

Pricing

Motorcycle shops rarely advertise their prices. A customer walks in and a price given. So winning customers by direct price announcement is rare. In some locations there tends to be subtle pricing agreements among retailers, but these don't hold because there is no proper way of enforcement, and then the shop owner will make decisions based on his business. If say there are dominant players and you the new comer has agreed to some pricing methodology but you are still struggling to find customers, and then you are not even sure the competition is following the same, and it's the fourth month and you can't meet the rent, can't you price in a way that ensures sales and at the very least survival? This is not to say you should compete on prices but the importance of being real to your own business circumstances.

There is no exact pricing formula. And two retail shops within the same location could have widely varying prices. Still every item has what is considered the market price; a sort of maximum acceptable price. Well these are market driven, and settled on over time by the rules of demand and supply. And there is the comfortable range beyond which the rider will not buy and below which the business suffers.

This means that at every one time there is a range of prices more so at the retail level. As expected there is a level and room for negotiation. If a product has a possible margin of Kshs.200, a retailer could sell it to one customer at price that gives her a margin of Kshs.100, another Kshs.150 and still another Kshs. 200...



Notable is that riders often stay in pools as they wait for their customers, and hence they share information on repair and maintenance. It's easy to build a reputation, as expensive, cheap or fairly priced. The expensive reputation could be fatal especially in a market with several options.

It follows then it's important to know the prevailing retail prices. This will not only help you price appropriately but also in sourcing.

Mechanics are a good source of this information. Approach one with a list as above, provide some motivation and ask them for prices. Friendly shop attendants could also provide you with the information. Some could need a motivation, and then outside the shop away from their bosses.... 
Much more in the complete guide.....

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Wholesale & Retail Prices: Sample

To give you a feel of what margins to expect below are wholesale and retail prices of over 50 items. Please note these prices are for November – December 2020 from a sample of wholesalers and retailers.  Although these are actuals the specifics could vary from one wholesaler and retailer to another. Where retail price is lower than the wholesale then the retail price is for the lower priced items.  


ITEM NAME

BM150 – Wholesale (Kshs.)

BJ100 – Wholesale (Kshs.)

TVS100 – Wholesale (Kshs.)

TVS HLX – Wholesale (Kshs.)

RETAIL Price (Kshs.)

 

ACC CABLE

80

80

80

100

150

 

ACC PIPE

120

 

100

150

 200


AIR CLEANER

120

 

 


200


BALL RACE

160/200/220

160/220

160

160

250


BATTERY

1100

700

1100

1200

1600 – 1800


  Many more in the guide
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Margins

Margins as we see from above could be as low as 20. % to as high as
200 %.A rule of the thumb is that the higher an item is priced the higher the margins, after all the return should be equivalent to the capital invested in the item. Low priced items also have relatively higher margins. A Kshs.50 part going for Kshs.100 at retail...
Much more in the complete guide..... 

How much you will make say in a month will depend on the sales. Before we look at what affects sales let us look at some scenarios. .

Revenue: Case Study One
Assuming that you are selling only one kind of item. Let's take bearings...


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Revenue : Case Study Two

Let us look at a more moderate case.

In this scenario the shop sells a variety of items.


Much more in the complete guide....

Factors Affecting Sales & Revenue

Foot traffic

In addition to what we mentioned in the premises section.

The average spending on parts by a bodaboda rider is more or less the same within the same location. This means that this is a business which thrives on high foot traffic. Anything that leads to an increase in the foot traffic will lead to more sales all other factors like price and quality being kept constant. A convenient and easily accessible location thus will increase revenue.  Much more in the complete guide.....

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Opportunities & Survival

The market is expanding fast but is yet to get saturated. Opportunities thus exist in the business. 

Though opportunities are present survival in this market depends on the particular local conditions.

In most markets there are no retailers with roots deep enough to an extent that there is no room for one more. 

Much more in the complete guide....


Critical Success Factors

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 Factors in the business are:

Much more in the complete guide.....


What Is Competition Based On?

Competition in the business is based on price, quality, variety, location, marketing and customer service.

Much more in the complete guide.....

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Consumer Behaviour

At least 36% of the boda boda 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 every day to the owner. The rider takes care of minor everyday maintenance, and if it’s something major then the owner has to come in. This means there is a strong incentive to keep costs as low as possible so as to meet targets and maximize returns.


Much more in the complete guide.....

Licenses

The licenses required to run a motorcycle spare parts shop are the basic , to run any business. Below are the licenses , issuing authority and cost ...Much more in the complete guide.....

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Capital Breakdown

Below is a capital breakdown of a mid sized boda boda spare parts business...Much more in the complete guide.....

Manpower..Much more in the complete guide.....

And much much more information in the complete guide 

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