Kenya: Niche Market Investors Find Goldmine in Youth

Business Daily (Nairobi)

Chege Muigai

24 October 2011

It is Saturday in Nairobi and the Tamasha hangout in Hurlingham is steaming. Around 4pm, a group of young women makes a conspicuous entry.

They are dressed in tastefully designed outfits, some with exclusive labels from such celebrated fashion houses like Gucci and Calvin Klein — one even sports a Prada bag.

Their shoes are a mixture of boots and evening sandals. But what really gets patrons staring at them in awe are their cars. A Subaru Outback, a Range Rover Sport, and a Nissan Murano — cars that cost at least Sh1.8 million, Sh6 million and Sh5 million respectively in the used-car market.

The girls are only young professionals who look to be in their mid 20s. With an extended economic boom over the last several years leading to the world’s largest shift of lower level economic group into the middle class, according to economist Dr Gerishion Ikiara, and with most companies paying good money for the well educated young people emerging from universities, evidence of these improving fortunes has hit the streets big time.

As Lilian Tallu, one of the girls at Tamasha, tells us, this is the impressions age: “Nobody cares who you are any more, nobody gives a hoot how much you know unless you look the part.

With judgement becoming essentially anchored on physical sophistication, playing along is not just important, it is necessary.”

Ms Tallu is in her third year as an Account Manager at an advertising agency and argues that her Subaru Outback, the latest iPhone and iPad, a rich wardrobe, and gold adornments are not luxuries but vital accessories; “When I set out to see a client, I must be sure that he would want to give me a second look when I go through his door. The value of my ride, its unique make, my gold highlights… are calculated professional tools.

I can directly relate the success that I get on the business end to the way I present myself.”

Jaguar, a flashy musician and businessman, echoes Ms Tallu’s sentiments by offering his own personal example. “Sophisticated looks cost money to achieve, but they pay in top shillings. It is the value you wish to create of yourself that demands you go only for products that are rare, top quality, and therefore significantly more expensive. That is how you become visible above the crowd.”

Jaguar drives what is perhaps the most expensively assembled fleet of any local celebrity; a BMW 7 Series, a BMW X5 and a Toyota Harrier.

But as he explains, this is where his money comes from; “On the entertainment scene, people really do buy into appearances. When I go to discuss a deal with a promoter, I get what I want by driving in there with a sleek machine.

I know guys who are unable to negotiate good packages because of driving so-so cars like the Toyota Probox.”

The demand for stylish, top quality and exclusive products has not gone unnoticed by businesses which have been targeting the rising middle class with carefully developed products that align with the emerging trends.

“There were days when a product just needed to pass a minimum quality and functionality threshold.

Essentially, products were the same for everybody. But on the back of a largely globalised society emerging on the back of the Internet and the soap opera culture, people started being very particular about especially high quality standards and exclusivity of products.

It is more a question of prestige — the intangible effect certain products come with,” says Ms Sue Omanga, the marketing and branding firm Exclamation Marketing MD.

Demand for quality, exclusivity, and prestige is now a multi billion shilling industry right here at home, says Ms Omanga. From personalised weddings to premium coffee houses to first class dining and travel packages, Kenya Inc seems to have seriously angled for this vanity economy.

Quality is expensive

“Quality is expensive, but that is not what the middle class are worried about. They want to stand out, to grab attention wherever they go and to use stuff that offers durability and reliability. All that costs good money, of course, but money is of no object to this class.”

Ms Omanga believes that targeting the niche market tends to offer specific advantages to business. “With niche products generally being of a much higher quality, reliability and durability — and with the attendant personality distinction they offer their owners, the margins are often at a premium.

“To achieve success with niche buyers, an entrepreneur must have a keen sense of style, perpetual innovation ability to churn out more unique and continuously higher quality products,” says Subaru Kenya Marketing Manager Joanne Nyaga.

“Subaru buyers are mostly the motoring enthusiasts who drive – not just to get from Point A to Point B – but to mostly pass a message of youthfulness and vitality. That is what this product has always stood for.”

Ms Nyaga says Subaru is a very different type of car. “Boxer engines are unique to Subaru engineering and by design offer more efficient power output and stability, especially around corners and at high speed. Subaru cars also come loaded with exclusive safety and niche interior features. All our customers have that unique requirement and they find that in the Subaru.”

Ms Nyaga says niche buyers are more specific about substance than price, a sentiment Ms Omanga agrees with: “Mass market products lack that quality assurance and products are developed with instant consumption in mind. But one of the major selling points with niche products is their durability.

“That should mean a longer lifespan, less visits to mechanics in the case of cars and higher quality construction. In the end, niche products offer better value for money.

It is by far the better business model. But very many people still cannot afford quality — there is even a section of consumers who do not care. But with every passing day, the niche market is becoming even more important in Kenya.”

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