Home ECONOMY Sacrificing large profits now to make a killing in the future

Sacrificing large profits now to make a killing in the future

by biasharadigest

It is often said in business circles that venturing into business/entreprenuership is a gamble, it is possible that a perfectly mooted business idea may fall flat in your face but in most instances, huge risks have reaped dividends for proprietors of business establishments.

There are those businesses which make money by moving large volumes at modest profit margins, this strategy in business is known as economies of scale, Kenyan supermarkets are the epitome of businesses that apply this business model.

But the richest individuals in the world are those who spotted a business opportunity and tailored their products such that the masses instantly like them or see value for money in them.

That is exactly what is happening at Jumia Kenya. Before the online retailer, it would have been unimaginable to think that a 2kg packet of sugar would sell at Ksh20, at current market prices the 2kg packet retails at Ksh200.

So how possible is it that the same product can sell at Ksh20 in one store and Ksh200 in another and how does it make business sense for the retailer selling it at Ksh20?

Speaking to Business Today, Jumia Kenya Managing Director Sam ChappatTe says that the flash sale of Kabras Sugar is a long term strategy tailored to reward Jumia customers with affordable products and attracting new customers who are sold on the incredibly low prices of a different range of products.

“We invest in our brand and the flash sale is part of that. You benefit in the long term when you educate your market. We believe that by doing this we will grow, get economies of scale, break even and get money eventually,” said Chappatte.

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The strategy has worked like clockwork for the online retailer, the retailer’s reputation as an e-commerce giant has grown because of this pricing formula.

Conversely, the sale of a 24 pack of 330 ml bottles of Heineken beer at Ksh999 instead of the regular Ksh2400 during its Black Friday and Jumia Anniversary has endeared the company to millions of online buyers.

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The investment in the flash sale is reflected in the overall growth of the company, Jumia Kenya is now the most popular e-commerce platform in the country stocking a wide range of products from different vendors.

Chappatte added that during this year’s flash sale, Jumia Kenya broke its continental record of most orders placed in one minute.

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