Kenya’s retail sector faces a critical moment. Over the decades, Willy Kimani has seen the supermarket business model create retail giants only to fall into financial pitfalls. Others have entered the market and left after a few years, unable to cope with the economic environment.
The former Naivas Supermarkets Chief Commercial Officer believes under the current macroeconomic situation, another model is needed to deliver sustainable business growth while delivering value to consumers.
In December last year, he tested the waters with his Jaza Discounter Supermarkets, a hybrid retail that offers wholesale prices but in a less fancy supermarket set up
“We don’t have crazy marketing budgets. Nothing fancy, no fresh products that require ovens, or refrigeration,” says Kimani.
Competitive advantage
Jaza’s strategy revolves around three key pillars; keeping margins as low as possible and less focus on short term profits.
“We have a centralised warehouse system and this reduces suppliers’ distribution cost to each and every store and we in turn pass that to the consumers,” explains Kimani.
The third key strategy, cash payment on delivery to suppliers, allows Jaza to only stock fast moving commodities.
“It is all about working capital and cashflow management,” says Kimani, adding that innovative pricing models through use of crates instead of cartons reduces the cost of packaging, which allows the business to get discount from suppliers.
Kimani says that Jaza is intentional being a low budget store and when people walk in, they are quite clear that the retailer is solving a value problem and not necessarily choice.
This approach has seen the retailer grow to 11 stores within six months. It targets to have 40 stores by the end of the year.
Jaza Discounter Supermarkets Founder and Director Willy Kimani during an interview at their offices located along Mombasa Road in Nairobi on June 12, 2024.
Photo credit: Bonface Bogita | Nation Media Group
Finding investors
To fund growth, Kimani opted for local investors who believed and trusted in his entrepreneurship journey.
“All our investors are Kenyans whom we approached with clear plans and onboarded three,” he adds.
Pain points and target market
Kimani says that from the beginning, their target market was clear - mass market areas commonly known as traditional general trade market and the only thing Jaza did a bit different was picking the estates and being the neighborhood shop for everyday commodities and at the same time business-to-business (B2B) for the small businesses.
The entrepreneur admits that despite the good growth, getting customers and suppliers to understand their business model was not easy.
“The main one was starting a new business when the Kenya Revenue Authority was changing systems from TIMS to eTIMS. New businesses were not allowed to join TIMS so getting that integration has taken a lot of work and time,” he decries.
This he says has slowed them down when it comes to B2B business.
With their policy being to source purely from local manufacturers, Kimani foresees a day when Jaza may be forced to look at importation as an option when local production becomes hard given that manufacturers are not able to compete in the current regulatory environment.
“We are waiting to see the government’s spending because when it doesn’t spend, supermarkets feel it to the core. We are also waiting to see how local suppliers will thrive because the moment they begin to shift and move out of the market, it brings room for imports which is not what Jaza is about,” he points out.
To ensure consistency from local suppliers, Kimani says Jaza has a policy of 95 percent case fill (the number of product cases initially shipped as a percentage of all cases ordered) for every supplier at the central warehouse.
He says this is crucial because for small stores like his, when a product misses, the image becomes glaring, something that doesn’t auger well with customers unlike the big stores that can spread.
Market strategy
With a market that is approximated to be 30 percent modern trade and 70 percent general trade, Kimani says Jaza is operating on the latter which still has Kenyans with aspirations and that the need for the supermarket bit and consolidation is very important and the only way of winning them is through pricing.
“We bring competitive advantage with pricing and return policy where customers are allowed to return products when not satisfied even if half consumed unlike the local kiosks or dukas,” Kimani adds.
And with a new bakery, Kimani says Jaza is upping the game and aims to have bread and milk selling at Sh99, something he says will force even the bigger players to start thinking about mass market consumers.
To avoid cases of pilferage that bedevil most retail outlets, Jaza has deployed centralised warehousing system, regular stock take, avoidance of stocking high value items and ensuring accountability at the branch level.
Kenya’s retail landscape is full of collapsed retailed giants some of whom Kimani previously worked for.
“The biggest positive learning is that do your brand and services well and customers will troop in,” he says.
On the flip side, Kimani says he learned something on category management – having too many item lines upon which cash flow management becomes hectic because you will end up with products that have few customers and paid for by the fast-moving goods. “At Jaza, we have kept a very lean stock keeping unit (SKU).”
The other key lessons for Kimani were the need for strong corporate governance and paying suppliers on time.
“We pay cash on delivery and when you have lots of money in the bank, you might mistake it as yours and embark on an expansion spree and end up in limbo,” Kimani advises.
He says that at Jaza, they are not doing rapid expansion using other people’s capital or short-term loans but rather doing small stores which are easier to handle.
“We should be worried if we start doing many warehouses but our centralised distribution system allows for faster expansion unlike others who open warehouses everywhere and have distributors do direct delivery,” he adds.
Kimani says Jaza aims to disrupt the retail sector in Kenya and to achieve that, good corporate governance will be at the centre of the strategy as they onboard more investors to fund their expansion.
“We have a board but we are going to firm and better it up. We have people with knowledge in operations, finance, taxation benefit and legal,” reveals Kimani.
Kimani concludes saying that entrepreneurs need local approach to solve local problems, emphasising the need to avoid creating and solving problems that do not exist.
