18 Sept 2013
Why Kenyan importers are now backing mainland manufacturers…
Following our earlier interview with a Hong Kong businessman dealing with exporting to Africa ( How to succeed in African trade: Carmelton CEO on the perils of intercontinental exporting ), we look at the flip side of the coin. Rajnesh Patel, CEO of Crown Collections, a Nairobi-based importer, explains why he opted to source from mainland suppliers.
|Patel: "China has a strong emphasis on fashion".|
HKTDC: How long have you been importing goods from China and how did the arrangement first come about?
RP: I first began trading with China eight years ago. It all started following a trip to the mainland for an on-the-spot survey of possible sources for our products. Two of my directors went with me and we were looking for a variety of goods to stock a retail outlet we were thinking about.
We were looking for a reliable source for men's and women's clothes, shoes, travel bags and children's school bags. We had already been to Pakistan and India and identified probable suppliers, but we still wanted to visit Hong Kong and China to check out the goods on offer and assess the credibility of possible partners. I was initially worried about potential language issues, but it turned out that all the manufacturers we met had a local English-speaking interpreter.
I had heard reports that some of the suppliers featured in various business directories lacked credibility or were "briefcase factories" [fictional plants represented by supposed directors, who actually farm business out to third parties after signing contracts] and I wanted firsthand verification before I committed myself to any deals. It turned out I was worrying unnecessarily and all the manufacturers we saw were credible.
HKTDC: How did you first become aware of the companies you considered sourcing from?
RP: I engaged a clearing and forwarding agent who had handled occasional imports for our company and he was my guide in terms of shortlisting Chinese manufacturers and helping me find someone we could work with on a long-term basis. As our sizing systems are different to those in China and India, when I returned to Kenya I sent samples of clothing and footwear to the manufacturers I was considering in both countries.
Initially, both our potential Indian and Chinese suppliers got the sizes wrong. The Chinese company, however, was quick to issue a credit note to cover their error and, partly as a result, we have stuck with them ever since. They are also capable of providing products of varying quality in order to match the buying power of our different economic groups. This gives us the flexibility to tailor our products according to what each sector can afford.
HKTDC: Do most Kenyan businesspeople visit China before placing major orders there?
RP: Nowadays, traders don't really need to travel to China, unless they are looking to establish long-term relations with specific manufacturers. If they do, it's usually because they require huge quantities or highly-customised items. Most importers use the services of Kenya-based China agents. They arrange imports on their behalf, something that has proved hugely convenient to many companies and especially to small-scale retailers. It also solves the problem of having to deal with the intricacies of the import procedures. There are also now a number of Chinese wholesalers based in Kenya. They can supply traders directly, removing the need to source individually from China.
If you want to arrange your own imports, the China Centre [managed by the Chinese Embassy in Nairobi] offers trade services to importers and for those wishing to travel to China on business. It also helps to verify the authenticity of imported items and works to streamline the overall process.
HKTDC: In the past, there has been some conflict between local traders and Chinese distributors, with local businesses seemingly unhappy with competition from Chinese suppliers. Earlier this year, for instance, a number of local importers took to the streets of Nairobi to protest about the issue. Is this something you've had a problem with personally?
RP: This has not been an issue for us. Chinese companies are not involved in retail and don't have sales premises. They act as suppliers to the local retail market and, as such, have provided easy access to their products for many local retailers.
In truth, their presence in Kenya has made trade far more straightforward, especially for small-scale retail operators. The ready supply of Chinese goods benefitted a lot of people in the country. It has been particularly good for those women and young people who were unable to find employment and had no means of importing goods on their own.
In the past, this group was excluded by the high cost of travel, accommodation and the challenges of sourcing from abroad. Many took out loans or pooled their resources in order to try and meet these costs, but this left them still having to face the complexities involved with importing, aside from the financial side.
These people are now more than happy that their sourcing can now be done locally through agents, many of whom also provide individual help. Of course, some importers are unhappy that they have lost the monopoly on supplying Chinese goods locally, but the vast majority of people, especially small-scale traders, have benefitted enormously.
HKTDC: What is your impression of China in terms of the work ethics of its manufacturers and suppliers?
RP: They seem to work fast and are very efficient, with everything getting done on time. We are yet to have a problem with delays or, really, with any other issue. This is a real advantage they have over suppliers from other countries, most notably India and Pakistan. It is one reason why Chinese manufacturers have penetrated the Kenya market so successfully.
HKTDC: How do mainland products compare with those on offer from other countries?
RP: China has a strong emphasis on fashion and offers a broad variety of stylish goods. These are frequently updated, with new designs being created all the time, something which makes Chinese products far more marketable. This is particularly true when it comes to women's fashion and accessories, notably shoes and bags, which are usually offered in a range of colours, designs and qualities.
This is great for our customers as Kenyan women are very fashion-conscious, especially as the goods still remain affordable.
The main rivals to China in terms of supplying this mass market are India and Pakistan. Both of these countries tend to place greater emphasis on the durability of their products, but are comparatively weak when it comes to providing fashionable items. Their prices also tend to be higher than those of Chinese producers.
HKTDC: Have you had many problems with counterfeit goods coming from China?
RP: This is a global issue and not one confined to China. Generally counterfeits items are sold to those that knowingly seek them out and can be sourced from anywhere in the world. China is now working hard to market its own original designs and to establish its own brands. By and large, these are now being accepted in our market.
Importantly – and unlike European fashions which are largely designed solely for affluent purchaser – Chinese fashion manufacturers also cater to the middle and low income sectors. This policy has worked well in Africa, where the majority of the population is at the less-affluent end of the market.
The reality is that China provides products that are good value across a number of different economic ranges. It has actually brought a healthy level of competition into local trade.
Chinese manufacturers have worked hard to counter the perception that they offer poor quality goods. It is a battle they are winning with Chinese labels no longer a problem for Kenyan shoppers. Indeed, our customers are now getting more sophisticated. We no longer see people checking out the labels and, instead, they are paying more attention to the quality of the design and the fabric.
Obviously, we still see clothes on sale with labels that are deliberately similar to those of well-known European brands, but this practice seems to be dying out.
|Crown Collections: importing from the mainland for more than eight years.|
HKTDC: Has cultural compatibility been a factor in the growth of Kenya's trade with China?
RP: I think it has helped in that the Chinese have mixed freely with local people, even on a social basis. This has given them firsthand information as to local needs. This makes it far easier for them to make an informed judgment on local preferences. It has also given them greater understanding of the appropriate marketing required and helped to establish distribution networks.
I see the market for Chinese goods growing. This is because mainland manufacturers understand the economic capabilities of the various market segments, an understanding which also informs their pricing structure. It is a clear advantage in any business.
HKTDC: Thank you.
John Kariuki, Special Correspondent, Nairobi