Why growth of most supermarkets in Kenya remains a paradox

A few years ago, Nakumatt, Uchumi and Tuskys supermarkets were the kings of Kenya’s retail space. But now, Nakumatt and Uchumi have closed shop.

Tuskys is struggling while South African-owned Shoprite supermarket has said a painful goodbye to the Kenyan market. Why do some supermarkets thrive as others fail?

Poor strategic decisions for expansion and location is one reason. For Shoprite, the location was a big hindrance to its growth. It was located at Garden City Mall along Thika Road, where high-income earners rarely go shopping.

The struggling supermarkets stock ordinary goods yet most Kenyans prefer kiosks and markets near their homes. For Nakumatt and Uchumi, they over-expanded, eating into their asset base and making it hard to pay their suppliers due to slim profit margins. And this has happened to Tuskys too.

Professional mismanagement is their other soft underbelly. Uchumi is a State-owned supermarket and its poor corporate management is common with most government-owned firms.

Nakumatt and Tuskys had their business ran by family members and lacked professional management. We can learn a few lessons from these supermarkets.

Target high and middle-income consumers compared to low-income ones who buy only necessities, and in small amounts from kiosks and “estate-based” supermarkets.

The low-income earners have established relationships with the kiosk owners and can buy on credit, which they can’t from supermarkets.

Family businesses should train and nurture those who will take over after them to avoid mismanagement. Maintaining a good relationship with the suppliers is key to the success of every supermarket. Wrong suppliers mean poor services to customers. Understanding market needs is key for any business. That is why South Africans have failed to crack the Kenyan market.

What about Quickmart, Carrefour or Chandarana Food Plus? Quickmart has taken advantage of location as a competitive advantage. Most of its locations are near the customers or are easily accessible.

Carrefour has won the hearts of Kenyans by lowering prices. Naivas’ growth is fuelled by big sale offers to customers. Kenyans prefer lower prices, but you can’t win the market based on the price only. You must add quality, location, reputation and understand customers.

-Diana Ombere is a BCom student at the University of Nairobi.

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