I had a meeting last night in one of those pretentious restaurants that litter Lagos Island. This one was in Lekki Phase 1 with beautiful interior and ambiance carefully designed to prepare you to be duped.
My acquaintance had asked that I meet him there on a Friday night to finish discussions on some transaction.
The place was virtually empty, with waiters outnumbering customers, and I shrugged, blaming it on the dire situation of the economy.
I ordered chicken wings and took one more portion as takeaway. My friend ordered rice, lamb chops, and a drink. I had water with lemon, and that was it.
The bill came, and I quickly brought out my card to at least score one against my billionaire friend, only to receive the shock of my life.
N106,000 was the total bill, and I was also expected to tip the waitress.
I lost it and asked very politely but with contained anger, “What did we eat to warrant this one na?” 6 chicken pieces, one morsel of rice, a plate of lamb chops, and water with one pink drink? And these people are now taking me to the cleaners?
I paid and walked away, swearing never to set foot in that premises again in my life.
This morning, the economics of it hit me. They would hide under the rising cost of their business to profiteer. They will shout diesel cost, cost of food ingredients, taxes, staff costs, and all the costs that are input to a business in a hyperinflationary environment.
So, to mute the galloping cost, they push margins, which is expected to serve as a buffer for them, especially in the arena of replacement cost.
My friend, who also runs an AB&B in that same Lekki area, is also in this whirlpool. A plate of Afang is N11,000, the protein charges separately at N4,000, the swallow N6,000, and water N3,500. So for a well-made meal, he had spliced the pricing to arrive at a wholesome N23,500.
Now, the mistake here is the lack of creativity. I understand that they all plan to play in a niche market, but their pricing now takes them away from their natural market delineation based on capacity, service, and also location and dumps them in another service level that they cannot play.
So, like I told Tayo, instead of eating a bowl of Afang in your bedsit nestled in Lekki for N22,000, I’d rather go to the Marriott or Cactus and invest N40,000 for a good meal with the world-class service and networking opportunity that comes with it.
Last night, for the three hours I stayed there, I counted only 6 patrons, and if you average out, they would have generated roughly N1m from sales for that period.
Remember, this is a Friday night where Lagos is alight. So I can risk it and halve this by 50% for the other days of the week.
So if its proprietors are not into money laundering and using this as a front, then this is a loss-making venture that will soon shut down no matter the number of beautiful waitresses they adorn the place with.
This leads me to the chicken and egg situation the Nigerian economic milieu has led entrepreneurs into. Profiteering has now become a legitimate instrument of business survival.
Nobody is talking about business success anymore, but business survival, and to survive, you throw your cost at the market, who in turn are suffering from severe erosion in purchasing power.
The government is showing a lack of creativity in opening up the economy with retail-bursting policies that will grow it. Businesses are also showing a lack of creativity in tackling the issues, and the harried market is also voting with their diminished pockets, leading to systemic business collapse and its attendant loss of revenue for the Government, who now responds by hiking taxes or creating new tax lines, which finally just worsens the whole thing.
It’s a whole vicious circle of thoughtlessness in every stakeholder part – Government, businesses, and the markets. Everybody in the space has been zombified into a lethargic and robotic approach to macro and microeconomic issues that can be easily resolved through creative thinking.
I have heard that most SMEs collapse after 5 years if not less. Why won’t it collapse when you are charging N106k for 8 pieces of chicken?
If I were to advise these small businesses, it’s to go retail. Drop the prices, struggle to maintain quality; this will drive traffic and give you weight to determine some of your costs as a result of the wholesome purchases that you would be doing.
Outlets like Blackbell and Jevnik, to a large extent, have the formula and have been cashing out. With N20k, you can have a very good quality meal, in a beautiful ambiance, hence the constant flow into their outlets.
Now, compare this with these ones who open a huge complex, decorate it to high heavens and only 6 people come out on a bustling Friday to eat?
What they should realize is that we no longer have a middle class in the real sense of the word. Between Buhari and Tinubu, that economic grouping has been obliterated. We now have the rich, poor, and peasantry.
Most of us, including the writer, are categorized as poor and as such with no purchasing power to sustain the over 3m SMEs who play in markets that offer goods and services whose demand is inelastic.
So except these proprietors are drug dealers and money launderers who open up these outlets to wash their funds, they cannot survive as they all have to push towards the population who earn ‘free‘ money from illicit dealings or from ladies of easy virtue who earn almost free money and who really don’t have a cost of living beyond the monthly medical check-up for sustenance.
What is really needed in this kind of businesses is to seek a sustaining creative marketing strategy that would reduce cost, push and pull in traffic while keeping pricing at an affordable level.
It is not to go carry 8 pieces of chicken wing with a candle flaring in the night and be saying – “Mr. Edgar, your meal,” after which they will now give me a bill that is almost triple the official minimum wage.
I’m not hungry, please.
Thanks
