Agency work fuels royalty and rivalry in equal measure

The spread of agency services has opened new grounds of competition among small business operators. Traders are competing to offer agency services for various companies, besides their core business.

The businesses include retail shops, chemists, cybercafés, barbershops, fashion stores, salons, bars, and eateries.

The services they are competing to offer as agents are banking, mobile money, and sale of electricity tokens. Various organisations are seeking to spread their reach by offering services through agents. They are, therefore, partnering with operators of small businesses in both the urban and rural areas.

In Nairobi, that competition has shifted to agency business is evident in the number of shops scrambling to become agents. Some of the businesses are doubling up as agents for more than three services to increase their revenue streams and stay ahead of their competitors.

One trader offers mobile money services, electricity tokens, and banking agency services, besides running a chemist or dry cleaning shop.

“The practice is fanned by the fact that most businesses in Kenya offer similar services. If it is hair dressing, you will find three or four salons adjacent to one another,” Mr George Nito, a chemist operator in Komarock, Nairobi, said.

In the area where his shop is located, there are three other chemists. “This means there is stiff rivalry. I was the first to open the business and the rest have followed, with the latest starting six months ago,” he recounts.

The only way to stay ahead, according to him, is to offer agency services. “I realised this sometime back and started offering mobile money services. People would flock to my chemist for mobile money services and to buy medicine.”

Instead of whining, Mr Nito raised the bar by enrolling as a banking agent. “It was a smart move. I now have a service in my business which the others do not have.”

A month ago, Nito upped the game further by bringing in electricity token services. “The chemist is still doing well, but not as good as before,” he said.

In Nairobi’s central business district, things are no different. Some business operators are offering agency banking services for even three institutions.

“The good thing with agency services is that they bring in more customers to your business, some of whom may not have come to you if you were not an agent. This adds value to the business,” said cybercafe operator George Mutua.

Mutua doubles up as a banking and mobile money agent, besides selling soda and offering photocopying services. “There are two cybercafes in this building. My competitor also sells soda and offers photocopying and mobile money services, but he does not offer agency banking services.

This is where I beat him.”

Offering agency services, besides heightening competition, helps the traders to maximise on rent. “One pays rent only for his core business. This increases profitability,” says salon operator Victoria Adhiambo.

Henry Wandera, an economics and business lecturer in Nairobi, says agency services were bound to open a new front of competition among small businesses.

“The businesses are being courted by big firms to offer agency services. And as always happens among traders, when one sees another has started a service, they also go for it.”

While competition is welcome, he cautions, it may not be good for some businesses since the quality of services and profits could decline. Some traders might push themselves to limits they cannot afford to reach. “It can be disastrous. To be an agent, one must deposit money with the parent organisation after which they may take a loan. Should they fail to repay the money, they may have to close shop.”