Supermarkets employ new strategies to retain customers

That Nakumatt announced it will open dedicated stores across East Africa a few days before French retailer Carrefour opened doors to its first shoppers could be the greatest indicator that the battle drums have started beating in readiness for another round of supermarket wars.

With the high end and middle class markets now facing competition from foreign supermarkets who have more financial muscle and appeal for the sophisticated shoppers, local retail giants are being pushed to come up with more innovative ways to lock in consumers and increase earnings.

Attracted by a growing middle class and availability of retail space courtesy of the shopping mall boom, two foreign retail giants – Game and Carrefour – have in the last 12 months set up shop in the country with Botswana’s Choppies expected to re-brand Ukwala supermarkets, which it recently acquired.

The ripple effect has been a shift in competition from being measured by the number of stores that a particular supermarket chain has to the ability to attract a particular set of shoppers, a scenario which experts say is an indicator of a maturing retail industry.

Nakumatt is currently testing its dedicated retail store concept at the Westgate Mall with eight standalone supermarkets that only sell specific products, a radical shift from its current business model where it sells assorted goods under one store.

The dedicated stores include; Sports Planet, which exclusively stocks sportswear and accessories, Home appliances/electronics, Nakumatt Select, Nakumatt Supermarket-Home and essentials, Sleep Centre-bedroom furniture, Sketchers, Clarks and Kids&co.

The retail giant, which last month opened its 60th store in Emali, is also taking advantage of devolution to widen its market share by opening a store in each county.

By running two distinct operation models side by side, East Africa’s largest supermarket chain hopes to further cement its position at the apex of Kenya’s fast growing retail industry.

“Nakumatt’s network expansion has always been focused on a strategic commitment to meet our customer needs. Our ultimate goal is to be conveniently located for the smart shoppers benefit,” Thiagarajan Ramamurthy, the chain’s regional operations and strategy director, says.

He adds: “Customers in such areas are as aspirational and discerning as those in what would be considered leafy suburbs.”

Hot on the heels of Nakumatt’s change of strategy are Uchumi and Tuskys which are both redying themselves to take on kiosks and convenience stores for the “kadogo economy” through franchises - which are aimed at taking them to their shopper’s doorsteps.

AMBITIOUS PLAN
Troubled Uchumi, which made a staggering Sh3.2 billion loss last year, and which has made it cut its stores to just 21, is working on a franchise arrangement with 200 mini shops spread across the country.

The shops to be branded using Uchumi’s colours will stock low-volume packed items to target the micro-market.

“There is more traffic in the ‘kadogo’ economy and this is where money is and we have to be smart enough to tap on this,” Dr Julius Kipngetich, the company’s Chief Executive, says.

He adds: “The old model of expansion was to build shops which added to a fixed cost burden for Uchumi. The franchises we will venture into are partnerships where we will brand and supply our goods through the mini shops. It will not require any significant financial input with the consignment model where the goods belong to the supplier until it is sold."

Tuskys’ franchise model is almost similar to Uchumi’s, but on top of that, it has signed a deal with Vivo Energy Kenya which will enable it open 75 convenience stores at Shell-branded petrol stations, a move once completed will make it the largest retail chain in the country. 

The family owned supermarket has 58 stores spread across East Africa, just two lesser than market leader Nakumatt has already opened two such stores along Thika road targeting motorists as they stop to fuel.

Experts say the race to the top of the retail market has just been wide opened and will from now on be dictated by the preference of shoppers.

“The supermarkets have carefully studied the behaviour of shoppers and realised that for you to win you have to come close to the mass market,” Kariithi Murimi, an investment risk consultant, says.

“Like for instance, Nakumatt has been using the customer loyalty cards to track the trends of their shoppers and whatever they are doing now is to prevent them from accessing their competitors through opening stores in strategic locations.”

He argues that this is the same strategy that Uchumi and Tuskys are applying to ward off competition from second tier retailers such as EastMatt, QuickMart, CleanShelf, GreenMart, Mulleys, Mathias and KassMart, which are increasing their foothold in urban settlements and towns across the country.

Most of them are family owned enterprises but have been able to penetrate the market due to their accessibility and are now challenging for a bigger pie in the retail market.