Kenya’s retail sector has been facing turbulent past few years. There have been closures by supermarket chains owing to liquidity challenges. The most affected firm, Nakumatt, which went into voluntary administration in 2018 closed its latest branch at Megacity Mall in Kisumu, leaving the retailer with just five remaining branches countrywide.
Uchumi and Choppies have also found the market too tough that their remaining operating branches are hardly stocked.
Such closures have led to increase in entry of international players who continue to make inroads in the country taking over locations operated by the cash-strapped local retailers. Nakumatt’s closure, follows the entry of South Africa-based retailer, Game, which set up shop at Mega City Mall earlier in 2019.
The turbulence is now also felt by property owners, especially mall owners whose anchor tenants have been the retailers. To cushion themselves, property developers are increasingly shifting from the traditional set up of anchoring footfall attraction on one anchor tenant and instead having multiple anchor tenants. (Cytonn Retail Report)
According to Cytonn Retail Report 2019, Kenya’s retail sector recorded an average 8.7% point decline in occupancy rates in 2019 to an average of 77.3% from 86.0% in 2018, consequently leading to a 1.6% points drop in rental yields from 8.6% in 2018 to 7.0% in 2019, on average.
The fall of Nakumatt, Uchumi and Choppies, however, cannot be because of the market dynamics but purely on bad governance and financial constraints. Local smaller retailers like Quickmart, which acquired Tumaini Self Service recently has been expanding rapidly with new branches on Waiyaki Way, Magadi Road, Gitanga Road at Valley Arcade and one coming up along Argwings Khodhek Road. Majid Al Futtaim, franchise owner of Carrefour has taken up most of the spaces formerly occupied by Nakumatt with its latest branch coming up at where Nakumatt Mega along Uhuru Highway occupied. Naivas and Tuskys have also been operating with stability, other local but regional players like Khetias, Chandarana, Eastmart and Cleanshelf have established their footprints in their regions.
According to Kenya National Bureau of Statistics (KNBS) 2019 second quarter Gross Domestic Product (GDP) Report, wholesale and retail is among the sectors that registered high growth to support the general GDP growth. The sector registered 0.5% growth in second quarter to 6.8% compared for 6.3% in the first quarter.
In order to stay competitive, retailers have turned to innovation, acquisitions, partnerships and 24 hour operations in response to market needs. In December 2017, Naivas launched its online supermarket to attract the more tech savvy clientele who wish to shop at the convenience of their homes or offices and have their shopping delivered to their doorstep. Quickmart acquired Tumaini Selfservice, Tuskys launched its clothing brand, Mavazi Lifestyle. Quickmart has also partnered with local clothing store Jade Collections to have them sell their brands at the retailer’s branches.
Despite the turbulence, retail sector in Kenya has continued to grow owing to changing shopping culture, urbanization, growth of middle class with good disposable income and growth of e-commerce.
Image: Courtesy of Carrefour