Majid Al Futtaim, the local franchise holder for the French brand, had planned to open five hyper markets and 10 supermarkets in Kenya within five years of its 2016 entry.
The retailer has a long drawn out process for opening a new store, taking at least nine months to set up each outlet.
Global retail giant Carrefour threw its carefully crafted Kenya entry plan out of the window even before it had started implementing it.
When it became clear that the fire at the struggling Nakumatt supermarkets would not go out easily, Carrefour went on an impromptu expansion drive.
Majid Al Futtaim, the local franchise holder for the French brand, had planned to open five hyper markets and 10 supermarkets in Kenya within five years of its 2016 entry. The retailer has a long drawn out process for opening a new store, taking at least nine months to set up each outlet.
Within two months of Nakumatt vacating Thika Road Mall however, Carrefour hurriedly stepped into the space and now plans to similarly move into the Junction Mall, its fourth outlet in Kenya. “All the plans are no longer valid,” said Carrefour country manager Franck Moreau with a shrug.
Though rushed, Carrefour’s current expansion underscores the fact that the company, with a well-established international brand and Emirati financial backing, is perhaps best-positioned to step into the market segment that has been left void by Nakumatt’s financial woes.
Nakumatt positioned itself as the retailer of choice for Kenya’s upper-middle class. Carrefour says that it is an every-man shopping destination but there is no denying that its array of products will have a certain appeal to Nairobi’s well-to-do.
The long time and heavy investments it takes to open a store suggests that for all its investment muscle, the retailer may lack in the agility of some of its rivals in the market who are also eyeing Nakumatt’s lost market share.
Tuskys, for instance, has already taken over two Nakumatt outlets in Kisumu and Kisii. Naivas is also eyeing Nakumatt’s former niche with its own new premium outlets.
Other foreign retailers are also upping their investments in Kenya. Game plans to open its second store in the first quarter of 2018. Choppies is set to open stores at Kiambu Mall and South Field Mall.
Data from the Oxford Business Group suggests that formal retail only has 18 per cent penetration in Kenya with a lot of uncovered ground in smaller cities and towns.
Carrefour’s own expansionary plans outside Nairobi are in question. Mr Moreau said that it would take up to seven years to see a return on investment in Nairobi stores.
In less-developed markets, such as Mombasa and Kisumu, the break-even point could be even further in the future and the retailer is not sure about the value of such a risk. Opportunities, however, extend beyond Kenya.
Nakumatt had expanded into the region and is now quickly retreating from East African markets. Majid Al-Futtaim, whose franchise contract extends to much of East Africa, could also see opportunity in those markets.
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