Kenya’s retail spending hit Sh1.8 trillion in 2016 as the sector expanded by 13 per cent, a new survey by Procter & Gamble (P&G) shows.
The survey, released on Tuesday, says the rapid expansion of the retail sector is driven by several shopping dynamics including a tendency by Kenyan consumers to shop for goods in bulk as opposed to shopping for individual items when the need arises.
“The total cumulative figure for retail spending in 2016 is $17.62 billion (Sh1.8 trillion) which can be allocated across different channels based on 30 per cent supermarkets, 67 per cent traditional retail, and three per cent special channels. Overall, retail spending accounts for 30 per cent of Kenya’s GDP,” said P&G, one of the biggest manufacturers of consumer products.
The availability of quality brands and better prices for bulk purchases are said to have contributed to the expansion.
The study says that over half of Kenyan urbanites now shop in supermarkets regularly. This is driven by the fact that supermarkets stock branded products which are well known and perceived to be of good quality, says the study.
“Kenya was reclassified as a middle-income economy in 2015 and this is being evidenced by the shopping habits and rising consumerism.
Although traditional retail stores still dominate the fast moving consumer goods (FMCG) sector, supermarkets and hypermarkets are catching up fast,” said P&G managing director Vivek Sunder. The study points out that supermarkets are moving into residential areas as residents’ buying power increases.
“This is happening because neighbourhoods are now dense enough that they have the spending power to sustain such businesses, and also out of the need for retailers to compete with traditional traders on convenience. Proximity will be one of the big drivers for supermarkets as a channel gaining importance within retail,” the report says.
The rise in the cost of living has made consumers more discerning, opting for retail stores with a variety of products.
“Inflation has made consumers start to make choices between the products they buy, this is one of the reasons why supermarkets are welcome these days.
‘‘Supermarket shelves represent choice, and choice makes it possible for shoppers to feel like they’re making smart decisions in an inflation-ridden environment,” it says. Meanwhile, e-commerce and m-commerce are driving the growth of non-store retailing.
M-commerce, where Kenyans use mobile payment to shop, has tripled in the past two years making it the fastest growing sector in retail, according to the study.
“Traditional retail still dominates the market although supermarkets and malls, a distant second, are catching up as the choice shopping destination for Kenyans,” it notes.
Malls and proposed shopping complexes currently occupy more than 470,000 square metres of land including residential areas and attract more retailers who would not travel to the city to shop.
P&G’s data also reveals that Kenyans spend the bulk of their income (about 60 per cent) on food and beverages and 23 per cent is spent on personal and household care products.