Supermarkets growth squeezing small traders out of business

Alex Kamau has been running his grocery store for the past 19 years at an intersection of two roads in Buruburu Estate, Nairobi where he also sells fruits like oranges, bananas and apples.

Just across his stall, Kamau’s new nemesis stands tall, seducing a group that previously formed the core of his customers. This is Naivas Supermarket, the anchor tenant at The Point Mall.

Naivas occupies an entire floor of 46,000 square feet at the mall. The branch sells fruits and vegetables-basically the same items that Kamau hoards. But unlike Kamau, the supermarket also stocks indigenous vegetables like kunde (cowpeas), mrenda (jute), and pumpkin leaves.

The competitive edge Naivas enjoys over Kamau’s grocery business does not lie in selling that which Kamau is also selling, but in stocking additional items that Kamau lacks in his stall.

The variety offered by Supermarkets has been cited in various reports as the main reason they seem be winning the battle for middle class customers. The result, it seems, is the slow but sure death of the ubiquitous kadogo economy that has for long defined Kenyans’ shopping behaviour.

Work at night

“Most people come in to buy other products but while shopping around they pass by the grocery section. When they see our fruits and vegetables they buy,” says Dispy Odeyo, an assistant supervisor at Nakumatt Mega.

Supermarkets also offer a more conducive environment for shopping, compared to roadside sellers. “A supermarket like Naivas in Buruburu has ample parking space. I do my shopping there because of the ample parking space. I leave work at night and can’t stop at the roadside at that time,” says Mary Anyango, a resident of Buruburu we found shopping for groceries at the new Naivas Supermarket.

Kamau and thousands of other small-time traders and butcheries in fast-rising middle class neighbourhoods have found themselves fighting hard to stay afloat on the face of the encroaching supermarkets.

Whole sale and retail trade contributed about 8.1 per cent to the country’s total GDP last year, according to the latest National Economic Survey report produced by the Kenya National Bureau of Statistics. Mama Mboga played an instrumental role in this statistic.

By end of last year, the list of supermarkets in Kenya included three foreign-based supermarket chains and at least 18 local ones with a branch network that covers almost every urban street. Middle class estates have been a fertile ground for the retail stores.

Kamau says that when he first set camp in Buruburu Estate about 19 years ago, there was only one supermarket called Saveway in the locality. It was a small supermarket that could not risk getting into the business of selling perishables.

Then, the cost of electricity to power freezers and coolers was prohibitive and the number of shoppers willing to buy groceries from supermarkets was negligible.

Today, three of the biggest retail stores in the country, including Tuskys, Uchumi and Naivas have set up bases in every available space in the estate. This growth has been attributed to the burgeoning middle class.

Pyramid

One of the hallmarks of a middle class household with a disposable income of around $20 (Sh1,948) per day, says the African Development Bank in its report: The Middle of the Pyramid- Dynamics of the Middle Class in Africa, is a penchant for shopping.

The increase in the number of retail stores across the country, including foreign ones such as South-Africa’s, Game, and French’s Carrefour, is a response to this heightened consumerism. To squeeze the last penny from the pocket linings of these price-insensitive consumers, leading supermarkets have diversified into every conceivable good and service-from selling packed chapati and ugali to serving hot pastries and coffee.

Supermarkets, today, have bakeries and eateries. Today, more than any other time, a shopper would find everything under one roof at a supermarket. But despite this threat, ‘Mama Mboga’ still enjoys a stranglehold on Kenya’s retail market. Global information and measurement company, Nielsen, in its report: How to Navigate the Retail Distribution Labyrinth in Africa, states that the most common shopping channel in Africa is a simple table top, which it describes as “...a stand set up on the side of the road or in a local market to capture passing trade.”

In retail market formalisation, Kenya is ranked behind South Africa in sub-Saharan Africa and ahead of India, where 92 per cent of citizens still use traditional retail avenues.

It is estimated that 70 per cent of Kenyans still use traditional channels to sort their shopping needs. The study showed that up to 44 per cent of Kenyans visit grocers to buy specific items, while  25 per cent went to local shops because they were nearer. The report noted that for most of the shoppers who went to supermarkets, 41 per cent went there to buy products they could not find anywhere else. Another 38 per cent went to supermarkets because they are situated within their localities.

Up to 48 per cent of shoppers chose ‘Mama Mboga’ because of proximity. But this is fast-changing. What is happening in Buruburu explains why the statistics could be changing. Unlike 19 years ago, almost every section of the estate has its own supermarket.

Formalising businesses

The residents are not going to the supermarket to buy products they can’t find anywhere else, but are also going there to top up because the retail stores are nearer.

It explains why small-time traders are being pressured to formalise their businesses so as to be easily regulated and supervised.

According Mr to Atul Shah, the CEO of Nakumatt Holdings, there is need for the country to come up with a Retail Sector Development Policy to help transform the sector. “This policy would basically formalise the informal retail market. Such a policy, complete with realistic incentives for local retailers can further help to catapult and accelerate the transformation of informal retail players to the formal space,” says Shah. This, he says, is the only way ‘Mama Mboga’ will gain recognition and get support. “Mama Mboga is the basic retail entrepreneurship unit which progressively evolves to a kiosk, corner shop, convenience store, supermarket and ultimately to a hypermarket,” says Shah.

Unfortunately, such efforts have failed before. A draft regulation by the Agriculture and Food Authority (Affa) proposed the licensing and relocation of small-time grocers from estates to places designated by either the national or county governments. The traders objected to the proposals.

One of the advantages that customers cite when buying from small-time traders is that these entities allow them to bargain. “You can go in the Supermarket, they will sell you stuff at marked price. Here I recognise that different people have different capabilities. That is why customers here can bargain,” says Kamau.

‘Mama Mboga’ stalls can also sell on credit, and this has enabled them to build deep relations with their customers.

When Kamau took us through his worn out credit book, it was populated with names of customers who owe him money. One had a debt of Sh7,000.