Tier three retailers took up about 60 per cent of Nakumatt’s market share after its collapse according to Tuskys chief executive Dan Githua. This is contrary to the general feeling that multinational retailers such as Carrefour, Choppies, and Shoprite are benefiting the most from the closure of a chunk of Nakumatt and Uchumi outlets.
“Unlike what people are thinking, not much of the market share went to the new entrants. Actually, about 60 per cent of the Nakumatt business went to tier 3 stores such as Quick Mart, Eastmatt, and Chandarana,” he revealed adding that this is because people are now shopping nearer to home and on their route to and from work.
The collapse of Nakumatt and the financial troubles Uchumi Supermarkets has been facing has opened up the Kenyan retail market to foreign players.
“What happened to Nakumatt was very unfortuntate. […]. About 6,000 people had to lose their jobs and the market could only absorb 1500 at that time,” said Mr Githua during an interview with Kenyan Wallstreet.
Currently, Carrefour has six stores in Nairobi while Shoprite has taken up space in Westgate and Garden City malls with plans to start business soon. On the other hand, Botswana’s Choppies has over ten stores across the country.
The chief operating officer of professional services firm Grant Thornton Kunal Ajmera earlier this year observed: “Kenya’s retail sector has been very attractive lately due to favourable demographics and rising income level of the middle class. With the problems facing Nakumatt and Uchumi, there are gaps in the market which need to be filled in.”
The Distribution of the Retail Market Share
Mr Githua said the distribution of the retail market share after the demise of Nakumatt, which was dominating the regional market, has been fair with smaller retailers controlling about Sh2.3 billion per month of the retail market share. Since the retail business is in the neighbourhoods, tier three retailers are benefiting the most.
“I am very happy that the business has moved to Kenyan smaller retailers. Out of the Sh4.5 billion a month Nakumatt was making, less than Sh0.5 billion has gone to Carrefour while the rest has been distributed to other retailers.” he explained.
Mr Githua also noted that there is a strong emergence of local regional players such as Kisii Mart, Magunas, and Chandarana. The growth of these local players is going to check the entry of foreign retailers into the Kenyan market, he stated.
In the future, Mr Githua predicts that convenience stores will be the new trend in Nairobi which is why Tuskys has plans to open 70 such stores in partnership with Vivo. So far, Tuskys has opened six convenience stores which have been fairing really well.