Deacons goes downmarket to grow sales

A report from research firm Euromonitor International says non-grocery retailers in Kenya like Deacons are opening outlets within shopping centres to replicate the success of supermarket chains led by Nakumatt and Uchumi.

Luxury fashion house Deacons plans to venture into the lower middle class zones to capture new customers in a drive that will see it open shops in the south and east of Nairobi.

The firm—which houses luxury franchises like Truworths, Woolworths and Angelo— will launch the new plan in 2013 with a store in an upcoming shopping mall in Roysambu, off Thika Road.

This will mark the first time the retailer will be stepping out of its high –end shopping malls located in Nairobi’s Westgate, Village Market and Sarit Centre, targeting mainly luxury consumers including international civil servants, top businessmen and corporate executives.

But the migration of Nairobi’s working class to the periphery of the city backed with the springing up of shopping malls outside high-end zones, is enticing Deacons to remodel its strategy.

“The upcoming suburbs have a mix of lower to upper middle classes and we are reviewing our Nairobi branch expansion to be line with this trend,” said Muchiri Wahome, the CEO of Deacons, in a phone interview with the Business Daily.

The company plans to open a total of 19 more stores in the medium term to grow sales, a move that will significantly raise its current 34-store network spread across Kenya, Uganda and Rwanda.

Besides the Thika Road branch, Mr Wahome remained guarded on the new zones the company was targeting in Deacons drive to net both high and low end consumers—which it has preferred to capture with its Mr Price brand.

More members of the affluent and upper middle class are also running away from increasing land and property price inflation in central Nairobi, a move that has boosted demand for homes in areas such as Kiambu’s Edenville and Ruiru’s Sahara Ridge.

The proposed Tatu City is tipped to be the biggest upper and middle class property development, housing an estimated 60,000 to 80,000 residents.

Infrastructure development has also opened neighbourhoods that previously received little attention from property developers.

This includes the expansion of Thika Highway and the Eastern and Northern bypasses that have improved navigation within the city, which has been suffering from traffic jams.

Deacons generates the bulk of its revenues from Nairobi which has the biggest middle class in the region, with the Kenyan capital expected to produce more people with disposable incomes on the back of increased foreign direct investments.

Last year, Kenya accounted for 92.9 per cent of the company’s total revenues, with most of the sales being generated in Nairobi.

The firm’s stores in Kampala, Uganda, accounted for 6.9 per cent of the sales while start-up operations in Kigali Rwanda brought in 0.2 per cent of the revenue.

A report from research firm Euromonitor International says non-grocery retailers in Kenya like Deacons are opening outlets within shopping centres to replicate the success of supermarket chains led by Nakumatt and Uchumi.