Retailers rush for prime locations in survival battle

Before the year closes, what was famously referred to as Nakumatt Lifestyle will be Naivas Lifestyle as the latter is finalising renovations of the space.

This swap is a glimpse of the trend in the retail sector in Kenya. The tumultuous segment has seen established retailers collapse while others have swooped in and taken over.

International retailers have also joined the local players. Similarly, some have thrived while others have collapsed or made a hasty retreat from the dynamic segment.

The Lifestyle store changeover comes only a few weeks after Naivas opened shop at the Waterfront Mall, taking over space previously occupied by South African retailer Shoprite.

Shoprite, which is exiting the market following tough times for the retailer as a result of Covid-19 restrictions, came into the market at the close of 2018 taking up space at the Westgate Mall, Garden City, City Mall and Waterfront Mall. The first three malls previously had Nakumatt stores until the collapse of the retailer.

From Shoprite to Naivas, Nakumatt to Carrefour, Nakumatt to Tuskys, Uchumi to Carrefour, the musical chairs that makeup store selection have become synonymous with the retail sector in Kenya.

As soon as one retailer exits, they are replaced by a new retailer tapping into the existing space and gap in demand. In October, Naivas and Carrefour swooped in to replace Shoprite in two of the recently vacated spaces at the Waterfront Mall in Karen and the City Mall in Nyali respectively.

“At Majid Al Futtaim we have set up a specific internal development team whose main task includes identifying, analysing and assessment and then approaching landlords of the different locations that may be suitable for a Carrefour store.

“In some cases, we also have instances where potential landlords approach us,” said Franck Moreau, country manager of Carrefour Kenya at Majid Al Futtaim Retail.

Majid Al Futtaim’s Carrefour replaced Nakumatt in major malls including TRM, Junction, Galleria, Mega as well Uchumi at Sarit Centre. Carrefour Kenya has emerged as one of the major players in the local retail market, having launched operations in 2016 at The Hub in Karen, Nairobi.

“Locations are selected based on the convenience and attraction to our customers, as well as the expected footfall to maximise those we can serve,” said Mr Moreau.

To finance the expansion of its supermarket business, the Dubai-based conglomerate received a Sh3 billion loan from South Africa’s Standard Bank Group.

This year, the retailer opened its Mega branch on Uhuru Highway, another of Nakumatt’s former footholds, before venturing outside Nairobi with three branches in Mombasa.

International player Carrefour has remained resilient in the market even as Shoprite has opted to exit.

Similarly, Massmart’s Game Stores remain operational, albeit cautious with expansion.

Naivas has been on a bullish expansion even as some of its competitors continue to struggle. The retailer plans to close the year with 70 branches, up from the current 66.

Naivas’ rapid expansion has been as a result of the Sh6 billion raised from the sale of a 30 per cent stake to a consortium of investors. Some of its new openings include several branches it bought from Nakumatt last year as the former market leader (Nakumatt) was collapsing.

Nakumatt, which grew from a mattress shop in Nakuru to have branches across Kenya and the rest of East Africa, was forced to shut dozens of outlets from 2017 as it struggled to repay its suppliers, landlords and other creditors.

By February 2017, it had 60 branches that dropped to six in September 2018. The six branches were sold to Naivas in a deal worth Sh422 million in November 2019.

As Nakumatt was collapsing, Botswana retailer Choppies was going through its boardroom wrangles and feeling increased pressure from competition. In 2019, Choppies announced plans to sell more than half of its 15 stores amid struggles to grow market share in the increasingly competitive retail market.

The sale was four years into its debut in the Kenyan market after buying out Ukwala for Sh1 billion and rebranding all the existing branches to Choppies as well as set up new ones.

The retailer sold its branches, assets and stock to Tuskys, Chandarana, Quickmart and Appmatt supermarkets as it exited the market.

Chandarana Food Plus, which has been more cautious with its expansion compared to the other supermarket chains, replaced Choppies at the Signature Mall in February this year bringing its network across the country to 18.

Started in 1964, the supermarket chain has made a slow expansion in Kenya with branches in Nairobi, Mombasa, Nanyuki, Eldoret, Kisumu and Diani.

Uchumi, the first to suffer from the woes that continuously plague giant retailers, saw Nakumatt, Tuskys and Carrefour scramble to take up the vacated spaces.

Tuskys, before its current turmoil, took over spaces previously held by Nakumatt too including Nanyuki Mall and Crossroads Mall in Karen.

Naivas also came in and replaced Uchumi at Capital Centre, giving the retailer of monopoly over the underserved segment of Mombasa Road, South B, South C and Nairobi West area. The retailer also moved into Nakumatt’s South C branch in Mugoya Estate.

Last month, Naivas, which has been on a massive expansion plan, also opened at Kisumu’s Mega-City, another of Nakumatt’s former homes.

According to Naivas chief operating officer Willy Kimani, store selection is usually preceded by market research to confirm if the store will be viable and have adequate foot traffic to sustain itself before they open at the location.

The Waterfront store for Naivas was tapping into the Karen area where it had no presence. Mr Kimani is optimistic of the store’s performance even though former tenant Shoprite had indicated that part of the reason it was exiting the store was that there was inadequate foot traffic.

“If a store is non-performing, we take corrective action. If that does not work, we close it,” he says, indicating that the retailer is willing to shut down non-performing stores rather than haemorrhage funds in an attempt to sustain them.

Smaller retailer Cleanshelf found its niche within estates, setting up new branches and filling the gap left by Uchumi — during its glory days had branches in residential areas targeting consumers in their backyards. Cleanshelf’s Lang’ata branch is nestled comfortably where Uchumi once left its footprint.

largest retailer

As Cleanshelf was expanding, the small-time retailer was also building its footprint, attracting investors’ attention.

In September last year, Sokoni Retail Kenya, a special purpose vehicle controlled by private equity firm, Adenia Partners, concluded a deal to acquire a majority stake in Quickmart at an undisclosed amount. Sokoni Retail had acquired a majority stake in Tumaini in 2018.

Tumaini and Quickmart were merged operating under the Quickmart brand, posing them as major players in the segment.

Before the merger, Quickmart was operating 11 stores while Tumaini had 13 outlets.

Quickmart now has more than 30 branches as it continues its expansion, priming it to be the second-largest retailer as second-placed Tuskys continue to lose more branches over supplier debt and rent arrears.

Tuskys, which took over a chunk of Nakumatt’s branches as well as Uchumi owes a mounting debt of over Sh6.2 billion.

The family-owned business has been marred by wrangles and infighting among the siblings over strategy and use of cash, culminating in the forcible removal of executives.

The supermarket industry continues to serve a mixed bag of results for players attracting new investment even as some retailers struggle. It remains one of the most active segments in retail.