Buying and selling is the forte of most Zimbabweans who are into some form of business. Actually, that is virtually how most people start in business. I did highlight in one of my articles that becoming a millionaire or billionaire is for those who will go past just buying and selling. So, the bottom line is that buying and selling is a good thing; it is a good place to start. That is why in this article I shall be looking at buying agricultural produce from rural areas and reselling it in cities.
The Dynamics Of Buying And Selling
In the simplest of terms, the business model here is sourcing something at a particular price then you put a mark-up and the difference constitutes your margin. This means you have to explore ways in which you tweak any of the variables to maximize profits. Inevitably this brings me to the subject of economies of scale – understanding it is the answer.
My own definition of economies of scale is the reduction in long-run average and marginal costs arising from an increase in the size of an operating unit. This entails that there are several ways you can use to achieve economies of scale. For instance, you can reduce the cost of sourcing your produce by:
- Negotiating for discounts
- Negotiating for lenient payment terms
- Buying in bulk (which usually attracts discounts and lenient payment terms)
The key takeaway is: You must strive to reduce the cost of the produce and also the cost of acquiring, transporting, and selling the produce (along with other associated costs).
Why The Focus On Agricultural Produce? Why From The Rural Areas?
Primarily everyone has to eat so agricultural produce is always sought after. According to official stats, right now a family of 5 requires roughly ZWL$25000 to cater for their monthly groceries and other necessities. This tells you that people are always in search of cheaper ways to get their food. That is why sourcing agricultural produce from the rural areas to resell in urban areas is a potentially good business. The other thing is also is that it is generally cheaper to buy raw agricultural produce than to buy processed food. Why from the rural you might ask? There are many reasons:
- Most agricultural produce in the rural areas is produced at lower costs thus it tends to be cheap to source.
- There is a huge concentration of agricultural activities in rural areas thus the supply tends to be high. This means the price of the produce tends to drop due to the saturation of the rural market.
- Sourcing agricultural produce from rural areas will mostly entail having your own transportation. This results in not many people affording to travel to rural areas to source huge quantities of agricultural produce. This tends to keep the demand somewhat low. Couple that with huge supply you can see why prices can be much lower and easily negotiable.
- Folks in the rural areas do not usually require much to get by; their cost of living is relatively low. Thus they usually do not have problems selling their produce for much lower prices. This is even compounded by how low the cost of producing their produce usually is.
- They are also very flexible when it comes to prices and payment terms. It is commonplace to find rural folk accepting barter trade arrangements. For instance, they can accept payments in the form of basic groceries such as sugar and cooking oil, amongst others.
Some Key Things To Know
I have observed that the farther you move away from a city the cheaper the agricultural produce gets. I personally reside in Masvingo but my countryside is Hurungwe (Chundu, to be specific). Agricultural produce is way cheaper in Hurungwe than it is where I am. That is actually how it usually is so sourcing agricultural produce from farther tends to be strategic.
The tricky aspect in that arrangement is transportation. It would not be wise to use public transportation because it would be expensive plus it limits you on the quantities you can carry. Thus, it would be smart to pool resources together to reduce the cost element. For example, you can team up possibly with one of you having a spacious vehicle or truck. This divides the transportation costs amongst yourselves thus becoming cheaper.
You could also strike partnership arrangements with transporters such as haulage trucks. Someone in the countryside can actually load up your produce without you having to travel there. There are many ways you can explore to reduce transportation costs.
I would advise you to do your calculations before sourcing your agricultural produce though. As much as it is largely cheaper to source produce from rural areas do not just assume. It is important to look at your particular context and be sure it will be cheaper.
I would encourage you to do proper due diligence. You would not want a scenario where you get sold stolen produce; stuff like that can happen. I think it is also noble to be ethical; yes agricultural produce in the rural areas can be cheaper but do not take advantage or short-change people. Plus do not forget; find ways to move past and beyond just buying and selling. More money can be made from going into processing and more.