Entry of international retail chains and online stores is reshaping Kenya’s retail landscape only a decade after local players straddled the market like a colossus.
In 10-odd years, the space which seemed to have been locked by Nakumatt, Uchumi, Naivas, Chandarana and Tuskys is now home to Carrefour, Choppies, Massmart (Game), Woolworths, Mr Price, Truworths and Babyshop in a sector that directly and indirectly, injects Sh500 billion into the economy.
Syndicated news service Bloomberg yesterday reported that Shoprite Holdings Ltd is in talks to open its first store in Kenya by taking up retail space left empty by Nakumatt Holdings Ltd.
“We are currently in talks with some of the property owners but nothing has been signed,” Shoprite director Gerhard Fritz said in an emailed response to Bloomberg’s questions. Shoprite, which is also Africa’s biggest food retailer, is said to be awaiting outcome of merger talks between Nakumatt and Tusker Mattresses Ltd (Tuskys) before making a decision on their next move.
Highlighting Kenya’s growing retail spend, Oxford Business Group reckons the arrival of international supermarket brands reveals the potential of Kenya’s retail sector, though concentrated largely in Nairobi and major cities.
Carrefour — which is the world’s second-largest retailer — through its local franchise holder, Dubai-based Majid Al Futtaim has two shops in Nairobi, one as anchor tenant in the new Hub Karen and another at Two Rivers.
Game is also anchor tenant at Garden City. Replete with cash and coupled with well stocked shelves, allegiance could be shifting to global entrants, who are thirsty for a slice of the local market. However, in that period the well-organised retail sector has also seen yet another transformation in a dynamic mix that leverages on e-commerce, moving the sector to its new dawn.
Naivas Supermarket says it will launch an e-commerce platform before December having invested Sh180 million on its e-shop platform expected to generate at least seven per cent of its annual revenue.
“There is a huge opportunity because there are so many people we cannot serve right now, but that is possible to reach them online,” said Naivas chief commercial officer Willy Kimani when launching Naivas Pay, a new platform that integrates card and mobile money payments.
Online retailers such as OLX, Kilimall and Vitumob have also significantly helped create traction in the sector having set up online stores targeting Kenyans. According to Jumia’s managing director Sam Chappatte, the number of customers increased rapidly in the last two years, forcing the company to increase their product range from a few thousands, when they started to an estimated million during their next Black Friday sales bonanza next week.
“We (Jumia) have about 6.5 million visits per month, up from four million per month in March 2017,” says Chappatte, adding that he is able to convert between two and four per cent of the traffic into business.
Changing lifestyles, characterised by a fast-growing middle class, appetite for convenient shopping is growing online retailing very fast. This had been predicted by Consumer Insight as early as 2014 when research indicated a particular group of Kenyans were shunning neighbourhood shops and kiosks for supermarkets chains.
This caught the eye of international investors who tried to penetrate the market but were held back by local giants like Tuskys, Naivas, Nakumatassmart soon closed shop on steep competition from the local enterprises. As they were leaving, however, a Citigroup report predicted that East At, Chandarana and Uchumi supermarkets, who had wrapped consumers around their fingers.
Several retailers including Metro Cash and Carry, Shoprite and Mfrica, and Kenya in particular, would eventually be the next growth frontier for huge South African retailers as well as some of the world’s biggest retailers.
This has come to pass and some these retailers are back and gaining footprint through acquisitions in a country considered the second most formalised economy in terms of retail penetration, after South Africa.
Deacons, a leading clothing retailer went on to co-own local South African franchises such as Woolworths, Mr Price and Truworths, including international brands such as Babyshop. The luxury fashion brand Woolworths then moved on and opened its own outlets in Kenya after buying out Deacons Kenya’s stake in the joint venture formed in 2012.