A Morning at the Market: Nairobi Part Three

Sunday in Nairobi also began slowly; I think all of us were grateful for the chance to sleep in. Eventually, Cindy, the interns and I made our way to a market in the Central Business District so that the interns could do some shopping. My guess is that anyone who has ever been to a tourist-geared market in any developing country can immediately imagine the general environment in a market. Lots of cries of “my friend” and offers to buy tourist-esque products—plates, cloths, shirts, knick knacks, bracelets, etc—all at “the lowest prices in town”.

I was happy to discover that by telling people that I was not a tourist, that I lived in Nanyuki, and that I was just down visiting my friends, that they immediately stopped trying to sell to me. One guy even apologized for having bothered me. That, plus one of the few Swahili phrases I’ve mastered, “Niko sawa, asante” (I’m okay thanks, a must-know for all the street vendors in Nanyuki) meant that I was relatively undisturbed to observe two interests of mine: the psychology of influence and microenterprise.

People who know me know that I’m really interested in behavioral psychology and economics (once, when friends were impersonating me, they did so by saying “Dude so I read a really interesting study about that”) and so it was a lot of fun observing the techniques that the vendors used on my friends. A classic effort is anchoring, where you name a price, and regardless of the negotiation afterwards, the initial price will influence the frame of the person making the decision. For instance, if I asked you the following two questions:

Is the height of the tallest redwood more or less than 1,200 feet?

What is your best guess about the height of the tallest redwood?

You would almost certainly answer less for the first, then on average you would guess around 850 feet. However, if I asked you:

Is the height of the tallest redwood more or less than 180 feet?

What is your best guess about the height of the tallest redwood?

You would say taller, and then this time, your answer would be on average around 280 feet. Accordingly, it’s easy to imagine how crucial framing can be for the vendors.

What I found especially interesting was the way they dealt with anchoring on the buyers’ side. Psychology suggests that when someone gives you an unreasonable anchor, rather than give a counteroffer, you should focus your efforts on rejecting the other person’s anchor, and establishing how unreasonable it was. Without exception, that is what the vendors did. Whenever my friends began the negotiation with a low price, none of them ever gave another offer. They spent a good teal of time explaining how the price was unfair, and then would ask the buyers for a more reasoning initial offer. If they got it, they could proceed with their anchor, knowing the final price would be somewhere between these two.

Another technique used was one where the vendor tries to get the buyer to try the item on first, and then has them negotiate. There was a really amusing stalemate between Cindy and a vendor, where she wanted to know the price of sandals. He told her he’d tell her after she tried a pair on. She refused to try the pair on until she knew the price, and they continued in this fashion, with him asking her to try them on and her demanding to know the price first, until the stalemate was broken by her leaving. I thought this technique was really interesting by the vendor, that he refused to even mention a price until the buyer had committed to trying them and (in theory) imagining themselves as the owner.

If my entertainment from observing psychological methods wasn’t academic-y enough of me, then I certainly crossed the line by then turning to microenterprise profitability. First, I tried to explain the idea of bulk sales to a woman with whom my friends were negotiating. She wanted 200 shillings for one plate, but didn’t accept 450 for three. I tried to explain that as long as she had any markup, that she was actually making more by the second deal. If her cost was 100 shillings, she would be making 100 by the sale of one. However, if she sold 3 for 450, she would in fact be making 150 (450-3*100). However, she remained unconvinced.

Then, at the following stores, I tried to figure out how their business model worked, and how they received the initial capital infusion needed to buy all the supplies. Looking around at a kiosk, you’ll see pretty quickly that they have a loooot of stuff. Even if they’re able to get their goods at a huge discount, it requires a pretty large initial investment, and given their reasonably low incomes, it was unclear to me as to how they got the goods. The owners with whom I talked to eventually conceded that several of the businesses bought the goods together, but I couldn’t get any more details. I’m not sure if they take out an initial loan that they repay once they’ve sold the stock, if they start with a small, affordable inventory and then buy more as they grow, or if they employ some other method. In any case, I’m determined to find out more the next time I go to a tourist trap. Maybe they’ll be more forthcoming if I buy a bunch of stuff first.

After shopping, it was back to Zara’s place for lunch, then time for a matatu back north. I engaged in a silent but persistent battle for armspace with the Kenyan seated next to me, which ultimately concluded by him establishing pole position against the seat cushion, and then pulling a veteran move by falling asleep beside me (well played sir, well played). As we headed back up to Nanyuki on a fairly uneventful trip (though our driver was briefly pulled over, and it seemed like he might be about to pay a bribe; he didn’t) I couldn’t help but think I was exactly where I wanted to be. I’ve learned so much already during my time in Kenya, and I can’t wait to see what lies ahead.

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7 Responses to A Morning at the Market: Nairobi Part Three

  1. N P says:

    Nate, JP here. Really enjoying your blog! Very insightful, witty, and well written. I feel like I am experiencing Kenya through your eyes. Keep it up!

  2. tooth sauce says:

    “(once, when friends were impersonating me, they did so by saying “Dude so I read a really interesting study about that”)”

    only once?

  3. lrb5 says:

    I see a pattern here…sleeping late. Is that something new?

  4. Alison says:

    This is great! I’m super into the vendor psychology stuff.

  5. RB says:

    Hey Nate. You could just be silent when dealing with the vendors. It seems from experience that they lower their price. That would be one way of dislodging the anchor.

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