Competition and efficiency of food retailing to the low income consumers in Nairobi
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Competition and efficiency of food retailing to the low income consumers in Nairobi was studied. The ·study concentrated on structural aspects that affect efficiency of food retailing. Consumer buying and expenditure behaviour and patterns were studied. The role of the Central and Local government in the development and operation of food retailing was described. Tentative recommendations of the improvement needed in the food retailing system were made. The study was based on primary and secondary data. Primary data was collected using two structured questionnaires to interview food retailers. Non questionnaire interviews were conducted with the staff of Nairobi City Council, and three leading food processing firms in Nairobi. The low income areas studied were selected on the basis of secondary data available from the Central bureau of Statistics of the Ministry of Finance and Economic Planning. The consumer study was also based on data available from the Central Bureau of Statistics. The low income consumers were those with household incomes between K. shs. 0 to K. Shs. 699 per month. This income group constituted approximately 55% of the Nairobi inhabitants. "Food Retailing" referred to the selling of food to consumers for home consumption. The study included meat products as this aspect was studied elsewhere. The study showed the consumer purchasing patterns and behaviour were determined mainly by the locational convenience of food retail outlets, a wide variety.of food items, credit facilities provided by the retail outlets and the quality-price aspects of the food items. Thus, consumers preferred different types of retail outlets for different reasons. The consumers in the areas studies spent approximately 40% of their total expenditure on food. Food had the largest ~hare of the expenditure over other items like housing, transport, health. The diets of the low income consumers were predominantly made up of starchy foods. The food retailing system in~the low income .areas was characteristic of a traditional system, The outlets were atomistic, with low sales volume. low food variety and low sales area. The businesses were individually owned by the family. A large percentage of the businesses were not formalised by licensing. Many of the retailers operated illegally~ The retailers had a low level of entrepreneurship, and little formal education. The businesses suffered from lack of sufficient capital, small individual retail transactions and food retailing infrastructure, such as lack of sufficient retail workers. Competition in food retailing was severe. There were many retailers, and many types of retail outlets: Kiosks, Nairobi City Council Markets, Dukas, Street Stalls and Street Hawkers. The retail outlets were located within close proximity of each other. Entry barriers to business were low. There was a high degree of product similarity from outlet to outlet. Vertical and horizontal. integration, cooperation or co-ordination in the food retail trade were absent. Market information to retailers and consumers about prices, supply grading and standard measures, was scanty. Efficiency of food retailing was relatively low. Food wastage and spoilage within the system was high. The marketing and operating costs and net margins were relatively high. Productivity of labour and ~capital in food retailing was quite variable from outlet type to another. The productivity was also relatively low. The research findings indicated that the low efficiency was a result of the food retail structure. The large number of small retail outlets, with no vertical and horizontal integration, resulted into atomistic retail structure, and high degree of duplication of activities. The unco-ordinated procurement and selling activities, coupled with lack of storage facilities resulted in high wastage and spoilage. The high risks of fire, burglary and Nairobi city Council demolition of food. retail structures in these areas, and the high perishability of some food items, compelled the retailers to make excessive profits. Furthermore, the high risks involved in food retailing negated capital investment in food retailing. It was recommended that the Central and Local Government authorities should increase their involvement in food retailing. Areas that needed attention were the training of food economists and retailers; providing advisory services and market information to market participants. Market and marketing research in food marketing, regarding the optimal number of outlets, locations and sizes of retail and wholesale markets, should' be established. In order for these services to benefit the retailers. it was recommended that all retailers should be registered and organised in groups. This.would rationalise and centralise purchasing, transporting and storing food. Large quantity purchase would be achieved, avoiding duplication of activities. Group organisation should attract the capital and the management required in these businesses . It was suggested that food retailing should develop along the lines of the Nairobi City Council Markets with individuals renting stalls. Public and private. markets of this type should be encouraged. The development of this type of system would be consistent with the Government policy of increased employment and equitable income distribution, and yet introducing modernity and efficiency in the food retailing system.