Kenya’s retail supermarket scene has undergone turbulent times in the recent few years. Starting with Nakumatt Supermarkets and followed by Uchumi Supermarkets, the two have had a stark reversal in their fortunes from those seen at their prime.
In their wake, a domino effect downstream to associated partners and ecosystem players is still being experienced: realtors, suppliers, bankers as well as the employees are yet to recover.
Several reasons have been advanced for their current state but a recurring theme in both, was an overambitious expansion plan.
At its peak, Nakumatt had 65 stores and more than 5,000 staff across East Africa.
The growth spurts caught the market leader by surprise and led to a race for the top position in terms of number of branches characterised by a store opening blitz. The market’s reversal unfortunately ended up affecting both.
Such scenarios are not just limited to the retail sector and could happen even in healthcare. This particularly as we see an increase both in the number of branded facilities as well as smaller standalone clinics “growing up”.
In a survey of the top 10 providers, almost all seem to have opened several new units or be planning for this. A look at our healthcare human resources particularly for junior cadres, clinical officers, nurses and pharmaceutical technologists, suggests a bulk will miss out on mainstream formal employment.
In comparing data from the three registering entities, it is emerging that many are finding alternative avenues in self-employment.
However, factoring in unforeseeable circumstances may not always be our forte as health entrepreneurs. Looking at the current market dynamics and comparing statistics on population growth, number of providers and the economy trajectory, there is reason to pause and reflect.
In the current context, the much anticipated Universal Healthcare (UHC) rollout was envisaged as a growth opportunity and stimulated investment in healthcare at an unprecedented rate.
However, the actuality on the ground seems to suggest that the envisaged model will benefit mostly public health facilities, with a little trickle-down to private mid-level facilities.
Perhaps as a learning point, we health entrepreneurs need to anticipate the implications of competition and crowding out of players as has also been noted in other sectors. Safaricom’s M-Pesa agents’ distribution density offers valuable lessons in projecting client base versus number of providers and the impact on the average revenue per provider.
A few approaches have been attempted elsewhere to limit this crowding-out phenomenon, partly because its result of depressed revenues is often associated with unprofessional services or “undercutting of quality”. Unfortunately our liberal economy dictates freedom to operate anywhere.
While in the past this crowding out was mainly for pharmacies, the clinic distribution densities is also noted to be increasing. What is the impact of this on your expansion strategy and is there need for a moratorium against more new branches?