The ailing Retail Sector in Kenya: Which Way for Supermarkets as Giants continue to fall?

Kenya’s retail sector seems to be ailing. The once vibrant players in the sector are falling out of business one by one.

According to the Vision, 2030 medium-term plan 2013 – 2017, the retail sector is among the six priority sectors projected to make up the largest part of Kenya’s Gross Domestic Product (GDP) and to create approximately 50 percent of total formal employment.

In 2016, the retail sector expanded by 13 percent hitting the all-time high in terms of spending by 1.8 trillion shillings according to a survey conducted by Proctor and Gamble.

A closer look at the recent trends characterizing Kenya’s retail sector reveals mixed fortunes – whereas the sector has reported growth there are some unfortunate events which signal that the sector is not mature yet.

There has been a tremendous improvement in the supporting infrastructure which includes but is not limited to the recent rise in the popularity and penetration of shopping malls with supermarkets being the anchor tenants in virtually all the malls.

The Kenyan retail industry is made up of a number of supermarket chains that serve the population of their different needs. Some of these supermarkets are big with a number of branches while others are small with a specific niche in the market.

If the sector seems to be doing fine, why are the giants falling?

Nakumatt Supermarkets

Nakumatt supermarket chain started off as a small retail outlet in Nakuru town, with its iconic logo being an elephant clutching a shopping bag in its trunk, which symbolized its stability and reliability.

The retailer expanded gradually up to 66 branches across Kenya, Uganda, and Rwanda. Every big mall in Kenya ran to Nakumatt begging them to be their anchor tenant and this showed how they had an impact in boosting businesses whenever they were. They indeed were a big deal.

Nakumatt had over the years grown into Kenya’s most successful indigenous chain of supermarkets with a regional presence. At its peak, the retailer was estimated to be worth between 50 billion shillings and 60 billion shillings.

When compared with its rivals, Nakumatt had the best customer service in place and its employees were extremely courteous and always ready to assist. Unfortunately, it, later on, came to be revealed that beneath that face of a company doing very well, there was so much wrong going on in there. It is puzzling how the management concealed billions of debt which ended up weighing down the retail chain pushing to its death.

Sources familiar with Nakumatt operations disclosed that even though the giant chain blamed others for its woes, the situation was largely compounded by a weak management structure that exposed it to unnecessary losses. They particularly pointed out poor corporate governance as one of the issues that have affected operations just as it has been evident in other local retailers which are also family owned.

The company had also in the past been forced to deny allegations of money laundering and tax evasion with some claims contained in entries in WikiLeaks, a whistle-blowing website, linking it to the collapsed Charterhouse Bank.

A combination of factors including gross mismanagement, poor strategic decisions, tax issues and massive internal losses perpetrated by some wayward employees and suppliers are the main reasons behind the slow death of giant supermarket chain Nakumatt

The company had accrued massive debts with trade creditors including the suppliers of tradable goods on credit holding the biggest claim against the retailer.

The debt that stood at almost 19 billion saw the company close shops all across the country with most of the subsidiaries being kicked out for failure to settle debts.

Currently, the retailer has embarked on a business recovery programme with a focus on seven key branches – Nakumatt Mega, Prestige, Ukay, Lavington, Embakasi, Mega City (Kisumu) and Nakumatt Nakuru

The recovery programme dubbed Nakumatt BounceBack is supported by scores of local and international suppliers keen on seeing the firm back on track. As part of the recovery strategy, the firm announced the optimum restocking of seven key branches in Nairobi, Nakuru, and Kisumu, which will act as its growth foundation.

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Uchumi Supermarkets

The company was founded in 1975, as a public limited liability company, by three Kenyan parastatal companies: Industrial and Commercial Development Corporation, Kenya Wine Agencies Limited (KWAL), and Kenya National Trading Corporation.

The company that broke the surface as a powerful chain of hypermarkets in the 90s was crafted to offer local suppliers access to the market playing patron to some of the businesses that became successful and earning the patriot’s badge.

With a ring of nostalgia, Uchumi which opened branches in Kisumu, Nakuru, Kisii and Mombasa, the retailer’s brand carried with it the loyalty of Kenyans.