International chains give local superstores stiff c*mpet*tion
Seth Onyango @SethManex
Low disposable income, weak cash flow, poor supply chain management and an onslaught from deep-pocketed international chains threaten to push more supermarkets out of business.
Analysts, however, say that smaller supermarkets and informal retailers are, especially, finding it more difficult to recover from cash flow challenges that brought down several players.
Walmart-inspired Nakumatt, Ebrahim Supermarket, Uchumi and Ukwala went down amid fears that others could follow suit unless they made changes in their business model.
On the flip side, rising star Quick Mart, which is backed by Sokoni Retail Kenya who acquired a majority shares of the retailer at an undisclosed amount, are on an expansion drive, opening innovative stores in a bid to strike a chord with a cocktail of choosy consumers.
Online factor
In the changing face of the retail sector where online shopping has gained traction and consumer behaviour is unpredictable, Quick Mart has picked its cue, a model that determines who stays afloat.
Speaking to Business Hub, Retail Traders Association chief executive Wambui Mbarire said Quick Mart managed to fix its cash flow issues hence its successful run in the market over the last couple of months and years.
“Now they have a venture capitalists who has pumped in cash,” she said, asserting the sector is poised to grow in long term. She raised concerns that the decreasing disposable income is also affecting the way people shop.
“When there is no money in the economy, the informal sector flourishes because they can give consumers credit which supermarkets would not,” she said.
However, there are shoppers who still like the brick-and-mortar store experience that delivers sights, sounds and smells.
These desires, needs, and lifestyles are also reshaping the business, and leading the way to next-generation shopping as demand for on the go food and grocery takes centre stage.
Shopping experience
Now, large chains such as Carrefour Group (French), Shoprite and Game (South African) and domestic brand Quick Mart are throwing everything they can at the problem, incorporating fully-fledged grocery sell points, customised for different demographics who want a seamless shopping experience.
Industry experts agree that experience is paramount in creating a place that shoppers want to be, out and away from their computer screens.
But as the retail market experiences a dramatic shift from traditional to online shopping, which is projected to grow immensely over the next decade, supermarkets are struggling with their profit margins getting razor-thin.
Although, there are myriad of extraneous factors that have led to a broader slowdown in retail business, those operating are faulted for embarking on ill-thought expansion drive.
As a result, the market has become saturated with supermarkets fighting to serve a small consumer base, with plummeting sales meaning they cannot pay suppliers in time.
For instance, in Westlands, there are four supermarkets all within walking distance, that is, Carrefour (Sarit Centre), Shoprite (Westgate), Naivas (The Mall) and Tuskys (Westlands Square).
This is while other regions in Nairobi and other parts of the country remain underserved by first-tier supermarkets in what points to reckless completion.
At the same time, rental coupled with operational costs is also becoming a profit sucker for most supermarkets.
