Kenyan businessman aiming big with bicycle assembly plant
Kenyan entrepreneur Wycliffe Waweru is on a mission to set up the country’s first bicycle assembly plant. Bicycles are essential in rural villages where communities are cut off from paved roads. Even for the urban low income-earners, bicycles are a cheaper transportation mode. But for now, Kenya relies on imported bicycles.
Riding bicycles has been a passion for Waweru since childhood. In 2010, he quit formal employment and found his own business, Play Guru, with just six second-hand mountain bikes which he sold by the roadside in a Nairobi suburb.
“Some of my friends were pessimistic. They didn’t think people would buy a Ksh.30,000 or Ksh.40,000 (US$296 and $395) bicycle by the roadside,” Waweru says. “But for me it was a cool fresh start. I wasn’t paying rent and I didn’t need an office.”
Two days after setting up shop, he sold his first bicycle for double the amount he paid for it. He continued buying and reselling imported second-hand bicycles, making “ridiculous profits” of 200% to 300%.
“I was selling to people who were tired of buying from supermarkets and having to constantly do repairs. They were willing to pay a premium for better quality second-hand bicycles from Europe,” he recalls.
A new bicycle financing model
Play Guru’s business gradually expanded – at one point it had more than 350 bicycles for sale and lease. But then Waweru noticed a gap in the market. Low-income labourers couldn’t afford paying for a bicycle in one go. Since public transportation was also too expensive for them, many would walk long distances to work.
Waweru saw an opportunity to sell to this segment by negotiating payment agreements with their employers. He approached one company, signed up 39 workers who were interested in acquiring bicycles, and convinced the managing director to enable them to pay for the bicycles by deducting a small amount from their salaries every month.
“The pilot was so successful that in three weeks I had got referrals to one of the biggest private security firms in the country. I had orders for around 6,800 bicycles. It became a nightmare. I did not know where to start.”
But even with the new financing model, Waweru soon ran into other problems. Because he was stocking second-hand products from a variety of manufacturers, accessing spare parts was a challenge. And in instances where workers spent the same amount on different bicycle models, some would feel short-changed.
“I realised it was inevitable that I had to make my own bicycle for this market.”
Two years ago Waweru shifted his focus from retailing to working on setting up a bicycle assembly plant in Nairobi. He says the facility will likely open between the end of this year and early 2017. The parts will be sourced from Taiwan.
Within its first year of operation, Waweru expects the factory to produce 10,000 units a month.
“There are enough people in this market to buy bicycles. We will work with companies that will deduct a small amount from their workers’ pay to enable them to make the purchase. We are going to reach these low-earning employed people who walk to work. It is a humungous market,” he says.
Another sales channel will be through a network of retail franchisees. Waweru notes there is an expanding class of higher-income buyers who cycle for exercise and networking purposes.
“We will probably make more money selling to these people who buy high-end bicycles for social reasons, rather than for daily commuting.”
But the transition from retailing to building a production business has been challenging. Nonetheless, Waweru says he is motivated by the bigger opportunities this new model presents.
“I have faced difficult times. The past two years I have been living off daily budgets. I was living comfortably but in the pursuit of great success, which is setting up the assembly line, I have had to sacrifice much. I have even had to sometimes skip meals.
“I want low-hanging fruit, but what do I need to do to ensure that I will continually have low-hanging fruit? Let me endure a short period of sacrifice so I can have total harvest in the future.”