Supermarkets race to set up new outlets

The general slowdown in Kenya’s retail sector in the past year comes after years of double digit growth for supermarkets chains.

However, it will not stop plans for expansion with dozens of new outlets to be opened across the country in the next few years.

Nakumatt, Tuskys and other supermarket chains struggling in their wake have grown exponentially, grabbing market share from informal players.

The chains fuelled the ‘mall culture’ by setting up outlets in large complexes that offer a one-stop shopping experience, including banking, restaurants, groceries, pharmacies, beauty parlours, playgrounds and offerings of free wireless internet. The success of this model saw top players in the sector report huge growth in the last few years.

Nakumatt sales nearly doubled to Sh56.5 billion in 2013 from Sh29.5 billion in 2011 aided by geographical expansion.

READ: Westgate attack aftershocks cut Nakumatt sales by Sh4bn.

Tuskys’ sales have grown more than fourfold to hit Sh40 billion last year from Sh9.6 billion in 2007. They have attributed this to growth in number of outlets and innovations such as in-store bakeries, delicatessen, milk dispensers and butcheries.

Uchumi’s turnover quadrupled to Sh14.3 billion in the year to June 2013 from Sh3.5 billion in 2006 — the year it collapsed under the weight of debts before the government injected cash to save the supermarket.

The listed chain of supermarkets has diversified its offerings to include bakeries, food outlets, vegetables and M-Pesa outlets.

Retailers are now banking on expansion, product innovation and winning customer loyalty to overcome the slow performance registered last year.

READ: Two Tuskys shut as regulator blocks Ukwala deal.

Naivas said it has scheduled to establish stores in Nairobi’s Githurai 44 and Buruburu estate, Syokimau, Nyeri, Kisumu and Bamburi in Mombasa.

“We will also be using promotions, customer loyalty rewards and credit facilities to drive growth this year,” said Mr Willy Kimani, business development manager at Naivas. In April, the chain signed up consumer finances firm afb to unveil a retail credit card that allows shoppers to buy goods on credit and repay within six months in installments.

Uchumi has lined up a Sh1.5 billion rights issue to build a war chest to bankroll the opening of more outlets in Kenya, Uganda and Tanzania.

The cash call was approved by shareholders in December 2012 and was set to happen by June this month but was delayed to await an undertaking from the Treasury that it would take up its entire rights.

The delay has forced Uchumi to borrow Sh300 million to finance growth from the State-owned Industrial and Commercial Development Corporation, a development finance institution with a 1.1 per cent stake.

READ: Uchumi starts search for new Uganda manager.

Nakumatt last week opened the first of the three branches it acquired from South African retailer Shoprite for Sh3 billion financed through a loan from KCB Bank. The new outlet, at Mlimani City Mall in Dar es Salaam, brings to 48 the total number of Nakumatt stores across Kenya, Uganda, Tanzania and Rwanda.

“Growth will, however, be sustained through ongoing expansion projects and hopefully faster economic recovery,” said Nakumatt Holdings managing director Atul Shah adding that the supermarket chain plans to set up three additional stores in Kenya by the end of the year.

The new outlets will be based at Shujaa Mall, in Nairobi’s Donholm estate, SkyView Mall in Highridge and a complex in Bamburi, Mombasa.

Nakumatt has also partnered with Bank of Africa to introduce a hire purchase facility dubbed Mkopo Poa where consumers buy goods on credit and pay in 12 months at an interest rate of 1.5 per cent per month.