A few years ago, the Nakumatt, Uchumi and Tuskys supermarkets were the kings of Kenyan retail space. But now Nakumatt and Uchumi have closed the shop.
Tuskys struggles as South African Shoprite supermarket painfully bid farewell to the Kenyan market. Why do some supermarkets thrive when others fail?
Bad strategic decisions for expansion and location are one reason. For Shoprite, the location has been a major barrier to its growth. It was located in the Garden City Mall on Thika Road, where high-income people rarely go shopping.
The warring supermarkets sell normal goods, but most Kenyans prefer kiosks and markets near their homes. They have expanded too much for Nakumatt and Uchumi, depleted their asset base and made it difficult to pay their suppliers due to low profit margins. And that happened to Tuskys too.
Professional mismanagement is your other soft underbelly. Uchumi is a state-owned supermarket and its poor corporate governance is common in most state-owned companies.
Nakumatt and Tuskys had family members run their businesses and lacked professional management. We can learn some lessons in these supermarkets.
The target audience is high- and middle-income consumers versus low-income consumers who buy only the bare minimums, in small quantities, from real estate kiosks and supermarkets.
The low-wage earners have established relationships with the kiosk owners and can buy on credit what they cannot in supermarkets.
Family businesses should train and encourage those who take over after them in order to avoid mismanagement. Maintaining a good relationship with suppliers is key to any supermarket’s success. Wrong suppliers mean poor service to customers. Understanding market needs is key for any business. That’s why the South Africans haven’t cracked the Kenyan market.
What about Quickmart, Carrefour or Chandarana Food Plus? Quickmart has used the location as a competitive advantage. Most of the locations are close to customers or easily accessible.
Carrefour has won the hearts of Kenyans by cutting prices. Naivas’ growth is driven by large sales offers to customers. Kenyans prefer lower prices, but you can’t win the market based on price alone. You need to add quality, location, reputation, and understand customers.
-Diana Ombere is a BCom student at the University of Nairobi.