Fierce competition saw the entry, and exit, of various stores

Like other sectors of the economy, the retail market registered impressive growth over the last decade.

Competition remained stiff, especially with the growth of the supermarket phenomenon, which saw the edging out of retail giants Uchumi and Nakumatt from some areas by a host of new kids on the block, among them Naivas, Woolmart, Stagematt, Chandarana, Ukwala and Tuskys supermarket chains.

Analysts say low-income consumers prefer to shop among equals — to buy commodities in an environment that does not make them conscious of their economic standing — a reality which led to a strict market segmentation, with Ukwala, Naivas and Tuskys dominating the low-end market as Uchumi and Nakumatt battled for the svelte consumer.

Nakumatt took advantage of the misfortunes of Uchumi when the latter went under, but is said to be currently experiencing slowed growth, blamed on the loss of two of its key branches and a fiercely competitive business environment.

The stores — one demolished along Thika Road and the other razed down by fire within the city centre — moved Sh240 million on average in monthly sales revenues, out of an estimated total monthly turnover of about Sh2.4 billion.

The retailer also suffered a major jolt in 2006 after the Central Bank of Kenya put one of its bankers, Charterhouse, under statutory management.
The chain was the first to offer 24-hour shopping convenience, and the first to enter the Rwanda market, where it spent Sh240 million to establish the Kigali branch. Its total branch count currently stands at 22, including the Uganda and Rwanda outlets.

On the other hand, Tuskys has 23 outlets, strategically located near bus stations and spread within major towns in Kenya.

Expanding network

The retailer is currently expanding its network into sub-urban districts, and targets to have 50 branches across the country by the end of 2012.
Uchumi, currently positioned fourth in retail supremacy in Kenya, is slowly clawing back after years of mismanagement.

Before its fall, the chain was the largest and most popular retail outlet in the country, both in terms of network and number of customers. Its fall from grace began in October 30, 2001, when earnings declined by 68 per cent.

Prior to this, the supermarket had reported profits annually for 14 years, maintaining a significant growth in turnover over the same period. It had no long-term liabilities, and analysts have pointed out that Uchumi was so liquid that excess funds had been invested in Treasury bills.

In 2005, however, the retail chain faced serious financial challenges that saw its shareholders inject Sh1.1 billion through a rights share issue. It owed creditors more than Sh3 billion — against a total asset base of Sh1.8 billion.

According to a report by the Global Agriculture Information Network, a spate of spiralling costs emanating from a rapid expansion campaign, coupled with sluggish sales growth against a backdrop of declining revenue, sank the company.

Apart from Uchumi, which closed and re-opened, other retailers have been forced to make a silent exit from Kenya. Skymart, for example, which ran stores in Nairobi and Mombasa, made a retreat after trading for less than a year. Its failure was attributed to competition and the poor location of its stores.

Metcash, the wholesale group operating under the Metro Cash & Carry and Lucky 7 franchise banner, was also forced to make an exit in 2005.

Locally, the family-run Nova supermarkets were acquired by Naivasha Self Service (Naivas), which turned it into a profitable venture.