Middlemen: Here is how you can bypass them

Naftal Nyabuto, the CEO of M-zawadi Loyalty Group.

What you need to know:

  • Retail trade in Uganda contributes about 18 percent of the total GDP and 16 per cent of the labour force according to the Border, Trade, and Immigration (BTI) Institute, 2022 country report.
  • Statistics show that a consumer is likely to visit the retail shop or kiosk near them up to 38 times a month, meaning General Trade commands over 90 per cent of foot traffic.
  •  It simply means that manufacturers should therefore start paying more attention to General Trade. Though they consider this space to be unstructured, chaotic and murky, Sokojumla and related technology could just be what is needed to streamline this space.

Cost of most manufactured goods currently on the shelves would be multiple times lower if the monopoly and the predatory nature of middlemen are minimised or eliminated altogether from the value chain, a manufacturing sector expert has advised.
The involvement of a middleman in the manufacturing value chain, although bridges distribution gap, has also created a price distortion which oftentimes is more predatory than reasonable, with final consumer bearing the brunt almost all the time, an assessment consumer activists spoken to seem to concur with.  
It has emerged that more often than not, the predatory prices set by middlemen—who are essentially entities or persons who buy goods from producers and sell them to retailers or consumers, are multiple times higher than “should be” ideal rates.  
According to Uganda Manufacturers Association (UMA), the issue “of middlemen and their bearing on final prices” has become a sad fixture which they are looking to uproot, if they are to “maintain value for money.”
Selling directly to the consumers is one such way to bypass the troublesome middlemen. But, the question is: how? 

“The solution lies in technology,” says Mr Naftal Nyabuto, the CEO of M-zawadi Loyalty Group.
 He argues: “And the kind of technology that has worked in many markets and is transforming how manufacturers penetrate markets, with a focus on what is famously known as “traditional trade” or general trade.

This is important because according to Ministry of trade statistics, over 80 percent of the trade is traditional, with modern trade only having a market share of less than 20 per cent.
The Nielsen report elaborates that a typical consumer is likely to visit a Duka or Kiosk over 28 times in a month and only 1-2 times in a supermarket, thus making traditional trade the biggest trade channel in Uganda.
“With these statistics, the solution that will help manufacturers is one that will allow them to directly develop trade partners and understand who their partners are right from distributors to retailers and consumers,” says  Mr Nyabuto.

He continued: “This kind of technology is not only going to streamline the value chains but also help manufacturers create efficiency, reduce unnecessary cost and directly interact and create promotions to consumers across Uganda.”
In Kenya, a technology codenamed Sokojumla is proving to be an answer to the middlemen nightmare. It gives control back to the manufacturer, ensuring they are in control of their whole value chain thus eliminating middle men, with clear visibility of their route to market and all sales activities within the chain.

 “With this platform or related technology, a manufacturer not only has a holistic visibility on product movement from the factory to the Duka or kiosk at the bottom of the chain, but can understand and analyze their buying patterns,” says Ms Rahma Basemera, an independent value chain analyst. 
She continued: With covid-19 affecting many industries and disrupting value chains, manufacturers have no option except to find technology solutions that can reduce their cost of doing business while also gathering valuable business insights to support decision making.”

Statement by the Kenyan based company M-zawadi Group notes that the technology (SokoJumla) provides digital business solutions, a route to market automation solution, which is key for manufacturers and other businesses seeking to streamline their value chain and automate their route to market.
While speaking at the Marketers Night Out event in Kampala recently, Mr Nyabuto said: “Advertising budgets are increasing globally at faster rates than the revenue created and companies are now forced to reduce the cost of business. The only way to achieve both goals is to leverage technology.”