What is ailing local Kenyan retailers?
By Tony Opara
The South Africa-originating continental retail giant, Shoprite is at the moment rounding off on its plans to enter into the lucrative, Kenya market, The Difference has learnt.
This is even as cash strapped Nakumatt, the local Kenyan retail giant, has presently filed for bankruptcy.
Already the biggest branches of Nakumatt that are located in Westgate Mall and Thika Road Mall (TRM), as well as its 24-hour outlet in Nyanza have closed shop in a bid to help meet its financial obligations.
Inside sources say that by filing for bankruptcy, Nakumatt’s directors had hoped that the business will realise an improvement with the support of all stakeholders.
However, the competition has realised the gap the Nakumatt exit is leaving in the retail space and presently taking action. French retailer Carrefour has signalled already that it will occupy Nakumatt’s previous space in TRM from November 2017.
At the same time, South Africa’s Shoprite is pushing all stops to accelerate its already planned Kenya entrance.
Significantly, the Nakumatt crisis is coming in the wake of Uchumi’s own troubles, as that other Kenyan retailer is still battling huge debt and hoping for a government bailout and an investor to take up a controlling stake.
Commenting on the overall prospects for the market, Salome Kinyeki, a Research Analyst at Euromonitor International says:
‘The Kenyan retail space offers an abundance of opportunities with the penetration rate of modern retailing between 20% – 30%, compared to a mature market such as South Africa with a penetration rate of over 60%. It is important to note that the retail sector in Kenya is supplier driven and success is mainly based on the availability of product mix, minimal (or zero) pilferage and a strong corporate governance structure, all of which Tusker Mattresses Limited (Tuskys) and Naivas, have so far managed to do well so far. In addition to this, new entrants should keep in mind that they cannot get away with supplying substandard or low quality products to Kenyan consumers. This is because the consumers have access to good quality products at comparability cheaper prices, such as non-genetically modified (GMO) fresh produce, such as fruits and vegetables, from traditional open air food markets.”
Within this complex then, surviving local firms are making critical adjustments to help them survive over the long haul. As the market research provider, Euromonitor International further outlines: “Increased competition among modern grocery retailers in Kenya has spurred a change in strategy as they have widened their non-grocery portfolios by opening non-grocery specialist retailer shops, with an aim to grow sales revenues in non-core business segments.”
Shoprite has presently expanded vastly across the African continent with numerous outlets in West, Central and Southern Africa.