Retailers adopt new strategies to reverse dwindling fortunes
Increasing competition and difficult economic times are forcing consolidations in the retail sector as players seek new ways to survive.
The sector has seen a mixture of closures and exits of some brands with Ukwala being forced to offload its outlets to the Botswana-based supermarket chain Choppies Enterprises – now itself facing headwinds in the Kenyan market.
By the time of filing for the closure of business, the Kenyan retailer which blamed its woes on accumulated debt, had only one operating outlet while another former giant, Nakumatt has just completed the closure of three of its branches.
With unconfirmed reports saying it might close shop before the end of the year, Nakumatt is now left with Nakuru and Nairobi’s Highridge and Mega branches even as new entrants into the Kenyan market continue to pose stiff competition.
Local franchises Tumani and Quickmart have recently merged to leverage economies of scale in a face-off with established players.
Other foreign and local players such as Carrefour, Game, Naivas and Tuskys are also reopening new stores to grow their sales.
“What we are seeing is consolidation for economies of scale and greater efficiencies for sustainable business,” said Retail Trade Association for Kenya chief executive Wambui Mbarire.
Industry insiders say this tight market competition has made foreign players reduce the number of days they pay suppliers in a bid to keep their shelves full as some struggle with empty shelves.
Naivas chief executive Willy Kimani said some players had reduced the duration for paying for goods supplied to them.
“This has created an impression that some are late and suppliers are now demanding uniformity across the industry that they are paid earlier than it was before,” he added.
Nakumatt last week shut down three of its remaining six stores, dashing the hopes of those who expected it to somehow rise from the ashes of insolvency, following a revival plan that started two years back.
The three branches were closed in Kisumu and Nairobi’s Lavington. But competition is snapping up the vacated branches in a quick realignment of the industry.
Naivas has taken up Prestige on Ngong Road and Lavington outlets as the race for survival and dominance hots up. Choppies has closed its branches in Kiambu, Kakamega, Bungoma and many others in Kisumu on its journey to exit Kenya.
The new retail environment started with the problems of Uchumi and Nakumatt whose failure left a vacuum for the expansion of both local and foreign players.
The ensuing business environment saw suppliers get paid 70 days after supplying goods but some stores are paying after 45 days, the smaller ones after 30 days.
Kenya’s retail market is one of the biggest contributors to the gross domestic product after agriculture, tourism and construction, according to government data.
Kenya has in the last couple of years been ranked as the most vibrant retail market after South Africa.
This saw many brands pitch a tent in the country, but this year, East Africa’s largest economy was lagging behind her peers on the continent.