How to START A HARDWARE RETAIL BUSINESS in Kenya

With the construction boom in Kenya’s real estate sector, demand for construction materials and house fittings has gone up over the last few years. To take advantage of this boom and demand, consider starting a hardware business to sell these items. Hardware shops provide consumers with tools and construction materials needed to build, maintain, and improve their homes and properties.

Hardware businesses vary in sizes and items stocked. Big shops may stock a wide range of items while small and medium ones may stock just a small variation depending on their target markets. A hardware business can be a huge investment that takes meticulous planning and will need dedication be successful.

Location

It is extremely important to consider the location of your hardware business very carefully. The customers who will come to your hardware shop will most likely be people who are building, renovating or repairing their houses. You should, therefore, consider looking for a location where there are construction projects going on, although you could also get a location around downtown Nairobi in places such as River Road, Cross Road, Nyamakima Area, Accra Road, OTC or Gikomba area. Setting up in these areas will give you an advantage since there are already many such shops in the area. Many people who go shopping for hardware materials in Nairobi town always start there.

Other places around and near Nairobi which have many construction projects going on such as Kangundo Road, Thika Road, Mlolongo, Ongata Rongai, Kitengela amongst many others, are also ideal places to consider. Many people building in these areas may find it more convenient and cheaper to buy from you than to go all the way to town for their materials.

Just like many other businesses, the location for your hardware shop should be convenient, accessible and visible. The area should be well selected to attract those who are building and the room should be big enough to hold your stock items. Some items are bulky and heavy and will require enough space. Your rent budget should range between Sh40,000 and Sh50,000 for a small or medium shop. For a bigger shop, be ready with Sh75,000 and above. However, out of Nairobi town, like in the places stated above, rent will be much lower.

Licensing

The business permit costs to be paid will depend on the size of your hardware shop. For a small shop, payment will be up to about Sh7,000. If you are setting up a bigger hardware shop, the fees could range between Sh15,000 — Sh25,000.

The county government will determine the category and fees to be paid therefore ensure you visit the county government to confirm the exact fees applicable to your business permit.

Supplies

You can get your stock for your hardware shop from three sources. One, hardware wholesalers, two direct from the manufacturers, and three, secondary or specialty distributors. The usual avenue chosen by most small and medium hardware store owners is via wholesalers. Many large hardware import their supplies directly. Importing will require large sums of money because it would only be economical when you import very large quantities. For smaller quantities, it will be cheaper to source from local wholesalers.

For your small or medium hardware shop, you will source your supplies from large wholesalers located either in town or industrial area. Some wholesalers are also located out of town closer to residential areas.

Common Items

In most hardware shops, the items that move most are construction materials such as cement, iron sheets and undercoat paints. Others are fittings such as taps. Hand tools such as screwdrivers, brushes etc also move a lot since they are used and sometimes broken or lost. However, if possible, it is advisable to stock a wide range of items including padlocks, sinks, tiles, nails, pipes, timber, steel, tools, light fittings and even sand if you have space. You never know what someone will need.

Paints are also commonly bought items in a hardware shop. Most hardware shops agree that Duracoat is popular among buyers since you can get any color from dealers who use a formula to mix. Many reported that Crown paint was not as popular. The color paints will cost more while water-based paints are the cheapest.

Income

A hardware business can be very profitable if located in the right place. Profit margins on some items may be low but if you target to sell many of the items, your net income can be substantial.

For example, the selling price of a bag of cement ranges between Sh700 — Sh900 depending on brand, quantity sold, location etc. The wholesale price of the same bag will be in the range of Sh650 — Sh700 also depending on brand, quantity, and location. A single iron sheet will retail at approximately Sh500 or more depending on size, manufacturer, and location. The same iron sheet may have a wholesale price of about Sh450. A tap may give you a profit margin of about Sh35 — Sh50 per piece depending on type.

For your hardware business to generate good returns, therefore, you should target to move large volumes of materials in a day. This is possible if you are located in a place where several serious construction projects are taking place or in a place frequented by many buyers such as downtown. For a small hardware business, you should target around Sh7,000 or more in profits on a good day. Larger ones can bring in Sh30,000 to up to Sh50,000 on good days since many of them also sell wholesale and retail at the same time.

Since many construction activities take place around the middle of the day, most of these materials will be bought early in the morning and late in the afternoon.

Challenges

A hardware business survives best when you stock as many items as possible. One challenge with this is that some items may take a very long time to be bought. As you stock a wider variety of items, you increase chances of holding dead stock. Your cash may, therefore, be held up for a long time, even years. This is a challenge that you should expect in your hardware business. The trick is to reduce the impact of this on your cash flow by stocking more of what moves fast and less of dead ones.

Another worry to expect challenges with the business permit, especially when it expires and you are in the renewal process. This may take time and the authorities may keep bothering you on the ground.

Competition in this business is also very stiff. You will find a line of hardware shops on one street selling almost the same items. Your challenge will be to offer a wide variety of items at a good quality and at a competitive price. Chances are that many of the customers who will show up at your shop have already gone to other shops around there looking for the same item, or are ready to go to the next shop down or across the street. They may even get the item at a better price, therefore ensure that you do all it takes to make a sale to every customer who walks in.

Your hardware business will succeed if you develop good customer relations and employ people who have a very good knowledge of hardware stuff. A hardware shop may have as many as 20 or more different items, some very big and can easily be seen such as water pipes or steel rods and some as small as nails, screws or washers and nuts. Grasping the prices and types of all these items will require someone with good memory, though this can come with time.

Your items should also be arranged in an orderly manner to help in quick retrieval of any item that is needed without delay. Good housekeeping in your shop will improve safety since a hardware shop has many dangerous items that can cause bodily harm. Handling some of these items and move around the shop can be dangerous. Advice everyone in the shop to be careful while moving around or handling items to avoid injury.

Do not let the challenges stop you from making the good returns that a hardware business can offer. You can start small, stock few fast moving items and increase the range of your stocks with time as you learn the market.

Originally published at PesaConsult.