Where are your customers?

Each day, the arcades in the Central Business District (CBD), Kampala are getting empty. Could it be that people are laying down their tools? Should new entrepreneurs shun them as well or is there something we need to pay particular attention to?

But who was the customer of the arcades? Could it have been the hawker who bought crocs and laid them on the street for customers? If yes, then the moment they were pushed from the streets thus out of the CBD, business got polarised. That is because this tenant was not planning to do retail but wholesale trading. However, it was not the kind where one sells out of a container but rather from a bale.

“Consequently, the arcade tenant was pushed out of the arcade,” Ronald Mukasa, a financial adviser says.

When starting a business, Mukasa says the first thing to consider in regards to business location is where your customers are.

“If you are starting up a restaurant, and your clientele are the corporate people, it should be situated within walking distance from their workplaces, with lots of parking for their cars, and with a good ambience. However, if you are targeting people who carry loads somewhere in downtown, then the location changes to somewhere close to where they work.

“The location must also be one with low rent so that the food price does not go up,” he shares.

Just like with all economic activities, Covid-19 greatly affected business forcing many to remain closed for long. However, when people were at home, they wanted services closer. With their town shops closed, they were forced to experiment at opening wholesale shops in say, Nansana, and Nateete.

“When they realised that they could get customers out there, they decided to work nearer home than going to Kampala. Additionally, rent is cheaper. For example, where 50 square feet cost them Shs3m, they can get the same for only Shs500,000,” Rose Nakazibwe, a trader shares. Therefore, for one starting up, you may not need to occupy an arcade in the CBD if you can still make a sale within the suburbs.

Technology

In some cases, technological advances have rendered physical locations irrelevant. Technology has also played a role in the closure of several arcade shops because as digital technology takes root, the question is, “Do I need to have a shop if my customer can find me or I can find my customer?” As such, some traders are leaving the arcades.

“Being in Kikuubo does not translate in a customer knowing you or learning about your unique product. However, with more people coming to social media platforms, you can leverage on that pool to get clients without having a physical shop,” Mukasa says.

Increased taxes

Taxes have also led to the folding of several businesses. In regards to moving location, if the tax man is concentrated in a specific area, and businesses are struggling, owners will try all means to lower the amount of tax they pay to stay afloat.

“It could be as drastic as opening shops in their houses so they deliver the items to those that need them. It is a strategy worth trying for businesses that do not need lots of storage space or where deliveries are possible, looking at the difficult times we are in,” Nakazibwe says.

Starting from your home is something a budding entrepreneur can do as they spread their wings. Thereafter, you can decide on whether to rent working space or stay home.

While there are several external factors playing into why CBD arcades are getting increasingly empty, it is important to note that entrepreneurs are responding to their clients. For instance, after people lost jobs during the Covid-19 period, many were not called back. That means if you were selling food or even dresses in town, the demand is low, even for town deliveries. “Ultimately, you need to take, say the dresses closer to where they are. That is why you will find an increasing number of people who are displaying bicycles, and dresses in Kampala suburbs. It is simply a response to the current business environment that even a new business owner can play into,” Mukasa shares.

The change in occupancy could be because business owners have started asking, “Where is my customer?”, “How has my customer changed?” This should also help any budding entrepreneur when picking a business location. For instance, if your client is virtual in nature, you just need to have stock and see to it that you make three to four sales a day and deliver those. It is basically the business dynamics because while the business may be failing in a certain area, it could be flourishing elsewhere.