The role of the informal economy or Micro and Small Enterprise
(MSEs) in driving Kenya’s, indeed Africa’s, economy is increasingly
being recognised.
The 2016 MSME survey by the Kenya
National Bureau of Statistics revealed that the sector contributed about
34 per cent to GDP. Furthermore, about 90 per cent of employed Kenyans
sit in the informal sector.
It is therefore a puzzle
why this sector is not recognised as an expert reservoir of knowledge on
purchasing habits as well as consumer and market intelligence in the
country.
The reality is that most Kenyans buy and sell
goods and services in the informal economy. A report on retail in Africa
by Deloitte in 2015 indicated that about 90 per cent of retail
purchases in Africa are conducted in the informal economy.
This must be partly informed by the fact that the sector knows
how to continue to meet consumer demands and purchase preferences.
Informal businesses are good at deciphering and interpreting trends then
creating goods and services that meet the demand.
This
indicates an intelligence not only in anticipating consumer needs but
an innovation capacity that allows the sector to translate consumer
desires in products available for sale.
An example of
this is how furniture makers have foreign catalogues, magazines and
pictures of furniture that they can replicate at a fraction of the cost
for the domestic market.
There
is often the misconception that the informal sector is only for
low-income Kenyans; nothing could be further from the truth.
Middle-class Kenyans rely on the informal sector for everything from food, to fashion, furniture and fun.
Going
to a local for a drink and meal is common, buying basic food items from
the local kiosk is an everyday occurrence and going to markets to buy
second-hand clothing is commonplace.
The informal
sector is aware of the fact that consumer demand is informed by global
trends and preferences. The ubiquitous nature of smart phones means that
young people can see hot trends abroad and demand the same in the
domestic markets.
Thus, informal businesses have to be
able to quickly respond to trends and make hot items available locally.
Again, this demonstrates a level of market knowledge in the sector that
is often ignored and dismissed by most.
It can be
argued that if you want scalable market intelligence to inform product
development and marketing strategies, the informal economy is the best
place to go. Informal retail vendors have a consistent history of
responding to trends, anticipating consumer purchasing habits and
converting formal and expensive retail items into something you can take
home for yourself.
Sadly, most companies do not
connect how their own purchases and spending habits are captured in a
sector that is neglected statistically and in terms of market research.
Indeed, some companies even seem unaware of how they rely on the informal sector to push their own products and penetrate markets.
Indeed, some companies even seem unaware of how they rely on the informal sector to push their own products and penetrate markets.
In
short, informal businesses understand trends, customer preferences and
purchase habits. They innovate to meet retail needs and ensure that
consumer demands for goods and services are met affordably and
consistently. They are likely the largest untapped reservoir of market
intelligence in Africa.
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