their stocking to include high end
household itemss like furniture, fridges
and cookers. They were the first to
introduce loyalty reward points and
signed too several agreements with
leading banks to enhance digital
shopping and payment on the go.
Indeed, at the peak of their innovation
and success, Nakumatt came up with
their own label - the blue label another
first in the region to promote and
package their own brands. Not to
mention that they too were the pioneer
of the 24 hour shopping in Kenya!
At its peak, Nakumatt had the highest
spend per basket averaging Kenya
Shillings 1,100/= followed by Tuskys at
around Kenya Shillings 600 per basket
and Naivas way below at around Kenya
Shillings 500 per basket.
Until reality dawned on us and what
started as a rumor morphed into an
ugly reality. Things started falling apart.
Customers were greeted with empt y
shelves followed by loud murmurs
from suppliers and staff over delayed
payments and salaries. Not long
after, auctioneers descended on their
branches seeking monumental rent
arrears both in Kenya and Uganda.
It was soon revealed that Nakumatt
was reeling under the weight of debts
in excess of Kenya Shillings 30 billion,
with 15 billion owed to suppliers, 8
billion to banks and a seven billion
Commercial paper. This mountain
debt against thinning revenues is a sure
recipe for disaster.
In a letter to the ministry of
industrialization, Nakumatt largely
blamed natural calamities and
incidences beyond their control as
the main reason to this decline. They
accused the fires that razed their
branches, the disagreement with
NSSF over the ongoing construction
at their lifestyle branch that sent away
shoppers/tenants and the Westgate
terrorists attack and subsequent looting.
Also to blame was the Thika Road
branch demolition to pave way for the
12 MAL 19/17 ISSUE
‘‘Yes, several
supermarkets have
come up in the
estates but most
of them are Mom
and Pop shops with
no brand equity
or established
infrastructure. It
is far fetched to
imagine that these
nondescripts outlets
can bring down the
established brands.’’
superhighway and the mad cow scare
that condemned a huge chunk of their
meat consignment to waste.
On a closer look, one discovers that
it’s not only Nakumatt that is feeling
the heat in the retail sector in Kenya.
A number of retailers have closed
shop in the period from 2013 to date.
Latest records from the Association of
Suppliers in Kenya also indicate that
the industry is reeling under the weight
of unpaid supplier’s dues amounting to
well over Kenya Shillings 48 billion.
Nakumatt’s portion of this huge
outstanding debt is only 15 billion
leaving a whooping 33 billion with the
other supermarkets, a confirmation that
all is not well in the whole retail sector.
Lightness of a beginner
Its noteworthy that it’s only the old
establishments in the retail sector -
Uchumi, Nakumatt, and Ukwala that
are showing signs of extreme financial
distress while their younger siblings
appear on the face of it to be doing
just fine. This could be deceptive. The
fact of the matter is that the young
operators could just be enjoying the
lightness of a beginner. They too
have their challenges albeit in smaller
proportions.
Possible technological disruption
Arguments have been fronted
elsewhere that the established
supermarkets could be victims of
market disruption. Proponents believe
that shopping is going online and there
is no longer need for huge shopping
floors manned by several attendants
while shopping is just a click away.
While this sounds romantically
intelligent, I highly doubt that
Kenya’s online shopping statistics are
significant enough to dent the market
share of leading supermarkets. How
many Kenyans for example have
bought anything online leave alone
the usual groceries? This is an elitist
opinion that erroneously ranks our
third world market to those of the first
world.
It is significant to note too that even
in the very first world where online
shopping started and has has taken
root, traditional supermarkets are
still on the growth trajectory. Little
wonder then that the leading online
shop - Amazon just recently opened
their first physical store and are posting
significant visits.
Shopping may go online but the
shopper remains the same human
being bearing the five senses of sight,
feel, taste, smell and hearing. Other
than seeing, one can rarely taste,
smell or feel an item on sale online.
Moreover, the internet connectivity
and smart phone accessibility is
still too low in Africa to warrant a
substantive disruption thus far.
Local competition
This is usually the fall back counter
argument. The big supermarkets are
victims of small operators nibbling on
their market share at the estate level,
so goes the story. While this may hold