Four global retail chains eye Kenya

The appetite for Kenya’s retail industry continues to grow, with the impending entry of four major global retail chains.

Walmart (through its South African subsidiary, Massmart), Game Stores, Jet, and Edgars plan to open shop in Kenya by 2014. This will further heighten competition in Kenya’s retail market.

According to global property consultancy firm Knight Frank’s second quarter 2012 report, the international retailers are positioning themselves to take advantage of “Kenya’s increasing consumerism” as they seek to enter other African markets through Kenya.

“Consumers in urban areas are maturing as they have rising disposable incomes and are becoming more discerning in their tastes, trading up for more expensive, higher quality products and are increasingly accepting global brands,” said the report.

Knight Frank further notes that the retailing outlook in Kenya continues to be positive. The limited scale and positive macro-economic conditions (average GDP of 5.1 per cent expected through to 2014) make it an appealing choice for retailers.

The report says that seven malls are scheduled for completion by 2014. The malls will be located in the outskirts of Nairobi and Mombasa.

South African supermarket giant, Massmart, which is owned 51 per cent by US retail giant, Walmart, has booked space in the Garden City shopping mall on Thika Road, whose construction is to start in December this year and be completed by May 2014.

Kenya’s retail sector is dominated by six major supermarkets and numerous other smaller retail chains spread across the country. They include Nakumatt, Tuskys, Uchumi, Naivas, Ukwala, and Chandarana.

The combined turnover in this business is estimated to stand between Sh100 billion and Sh200 billion.

However, 80 per cent of the regional retail market comprises non-formal outlets such as kiosks and small corner outlets.

Some global food and beverage retailers like KFC and Nairobi Java House are looking to expand locally and into regional markets, as well.

KFC has, for instance, opened three stores in recent months in Nairobi while Java House, with a significant share of the café and restaurant business is pursuing an aggressive regional growth strategy.

The sector’s rapid growth is attributed to rising consumer spending power and the recent real estate and infrastructure boom. The country’s status as a major financial, transportation, and logistics hub, with a relatively stable economy compared to its other East African neighbours, remains a major attraction to investors in the retail business.

The World Bank estimates that about 40 per cent of Kenya’s population consists of the middle class, living on a daily consumption level of between Sh170 – Sh850 ($2 to $10) per person, per day. By 2030, with a projected population of over 60 million, Kenya’s is set hit the middle income country status.

The Knight Frank report, however, says that unpredictable inflation and volatile exchange rate are potential threats to the retail industry.