Cover Story
Retail sector: The power behind the growth
By Dave Oricho
[email protected]
A study conducted by Procter & Gamble in
February 2017, indicated that the retail spending of
Kenyans reached KSh1.8 trillion in 2016, an increase
of 13 per cent as some of the biggest players Nakumatt
and Uchumi continue to endure worrisome financial
woes.
Nakumatt that has recently filed for bankruptcy
had its debt rise from KSh4.7 billion in 2012, to around
KSh18 billion at the start of 2017. Clearly, there
exists a sharp disconnect between the industry’s
performance and that of its largest players. This could
only mean that small and medium-sized retailers are
the ones raking in most on the country’s increased
retail spending, in the midst of a fast-growing and
increasingly competitive retail space.
Global retail
outlets in Kenya
The period between 2015 to the present has witnessed
the entry of several foreign retailers such as Carrefour,
Botswana’s Choppies and Game, shaking up Kenya’s
family run private retailers that have dominated the
supermarket scene for a long time now.
By Nelius Kanyingi
[email protected]
Procter & Gamble shows that the total
cumulative figure for retail spending in 2016 is
U$17.62 billion (KSh1.8 trillion) which can be
allocated across different channels based on the ratio
of 30 per cent supermarkets to 67 per cent traditional
retail, and three per cent special channels. Overall
retail spending accounts for 30 per cent of Kenya’s
GDP.
Nakumatt and Uchumi have also traditionally
appealed to the moneyed middle class. As part of
this appeal, Nakumatt has acquired a reputation
of offering unique products and pleasant shopping
experiences, factors that have helped the retailer
distinguish its brand name.
Although there are varying quantification
and definitions of the Kenyan middle class, it is
agreed that the middle class comprises households
that spend at least half their income on goods and
services that are not basic necessities. The African
Development Bank (AfDB) places the Kenyan
middle class at 44.9 per cent. With the recent
surge in the number of lavish malls, most of which
are strategically positioned in suburbs, high-end
retailers such as Nakumatt, Game and French retailer
Carrefour have been in a rush to open outlets at
these malls, hoping to profit off a dismal and volatile
middle class TB
Earlier last month, Bloomberg, reported that
Shoprite Holdings Ltd is in talks to open its first
store in Kenya by taking up retail space left by
Nakumatt Holdings Ltd.
There is no doubt that the changing shopping
culture among urban consumers, with busier
lifestyles and higher spending capacity, is spurring
formal retail growth, with retailers seeking to meet
consumer needs and tap into their wallets.
Why are these global retailers jostling for
the Kenyan consumer?
Kenya’s formal retail penetration is at 35
per cent making it the second highest in Africa,
after South Africa’s 60.0%, which has served as
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