Nakumatt takes competition to Uchumi's backyard as grocery shops retreat to suburbs Shopkeeper Martin Majwega sits outside his grocery shop of 15 years at Nakasero Market building and reminisces about the good old days.Five years ago, he could barely handle the number of customers flocking his shop. Today, he is lucky to sell an item per hour.
Majwega blames the nearby Capital Shoppers supermarket for taking away not only his customers, but also those of all his neighbours. Some of his fellow grocery owners have since changed businesses from groceries to hardware stores.
From the look of things, Majwega says his worries will continue until he switches from a small grocery shop to his own supermarket.
And his fears are not without basis. A survey around Nakasero shows that only six of the 25 grocery shops are still in business after Capital Shoppers Supermarket expanded its operations in the vicinity six years ago.
Retail business is likely to become even more competitive as Kampala prepares for the opening of the first hyper store by Kenya’s largest retailer, Nakumatt in August.
Nakumatt that owns 18 supermarkets and hyper stores and employs some 3,200 people in Kenya, is expected to re-draw Uganda’s retail business now dominated by Shoprite and Game Store, both from South Africa, as well as Kenya’s Uchumi.
Nakumatt registered a turnover of 300 million dollars in 2006, an increase of 150% from the previous year, and is looking to take advantage of good economic growth figures in Uganda to expand further.
Market experts say the hyper-store will expand the range of items sold in the ordinary supermarket. Nakumatt is expected to sell everything from hardware, furniture, clothing to shoes and accessories, as well as confectionaries. The usual household groceries sold in small supermarkets and super select shops will also be expected to find space in Nakumatt stores.
Nakumatt comes at a time when retail trade in Uganda is slipping away from the hands of small shopkeepers to supermarkets that are sprouting in every trading centre.
Some shopkeepers are converting their shops into mini-supermarkets, virtually rendering the small retail shops obsolete.
Stephen Elwanu, an administrative manager at Capital Shoppers’, says that the average duka operated successfully through the 1980s and 1990s because supermarkets were thought to be a preserve of the rich few. However, with the expansion of the working class in the late 1990s, the supermarkets began taking centre stage, he said.
According to Elwanu, supermarkets are convenient shopping places for the working class clientele, who possess sizeable buying power.
“Many of our customers want convenience; to come in and buy everything in one place and walk away; some even shop once a month,” he said.
Supermarkets are also approaching several small to medium enterprises and urging them to take up credit facilities. Under this arrangement, employees can shop as much as they wish and have the bill deducted from their salaries at the end of the month. This means that an employee can shop for anything as long as they produce their voucher, and that keeps them away from the duka.
The opening of Shoprite in 2002 prompted Capital Shoppers to expand its operations, to tap into many of the clients, who had suddenly developed a taste for convenience in shopping in the Nakasero area.
When Uchumi opened at the Garden City in 2003 and Shoprite expanded its operations alongside Game Store in Lugogo in June 2004, the die had been cast for the small duka.
But the clients are having the last say.
Martha Ninsima, who holds a day job as a banker, says she prefers to shop at a supermarket, due to their convenience.
“Some of the supermarkets now operate 24 hours a day, so at whatever time you choose to retire from work, you can walk in and buy what you need and head home,” she says.
Ninsima adds that she appreciates the variety of products available under a pleasant environment. Like most shoppers, Ninsima says she looks at the clean packaging of products in supermarkets, quality products, as well as the fact that one can even return goods in case of a defect and get a replacement.
Others are taken up by the availability of month-long credit on their purchases.
But Simon Otaala, another shopper, accuses dukas of bad customer care.
“Many times you walk in and ask for something, the shopkeeper takes 15 minutes to find it, and when he pulls it out, it’s covered in dust, and you wonder whether to buy or not,” he said. Otaala predicts that the small dukas will finally become extinct in Kampala in three years time.
Supermarkets, Elwanu says, are also able to offer the kind of discounts that the small shops cannot as they purchase stock in bulk.
“We are presently able to sell a kilogramme of sugar at Shs 1,400 for those who buy in bulk, which the small duka can’t,” he says. And customers by inclination will go for the cheapest possible option. He adds that the customer has the assurance of quality in the products purchased because supermarkets buy directly from producers or licensed dealers, and that in case of customer complaints, they can return goods in exchange for a replacement.
Behind the scenes, another battle is raging; the battle of the supermarkets.
Metro Supermarket had been in brisk business until Shoprite extended its services to the swanky Lugogo Mall in 2004. Three years later, Metro Supermarket had closed down.
Nakumatt has chosen a spot near Garden City, the home of Uchumi Supermarket, for its grand opening in August. While it is too soon to speculate the outcome, what is clear is that the battle lines have been drawn and the fight for every retail customer is, but just months away.
Uchumi’s Assistant Manager, Willy Kakuru, remains unshaken by the coming competition, maintaining that they are ready for the challenge.
Nakumatt and Uchumi are not strangers in the fight for dominance. The two are now extending their business rivalry beyond Kenya, their home turf.
“When you look at Uganda’s economic growth from a distance, you think retail trade in the country is child’s play, let them come and they’ll feel it,” Kakuru said.He said that a Ugandan customer is looking for certain intricacies that they have already mastered, adding that Uchumi is keen to maintain its position in the market.
For Uchumi, the stakes are high as their Ugandan business remains the most successful following the near collapse of the Kenyan operations in 2006.
The Kenyan chain has since returned to profitability with a Kshs 113 million pre-tax profit within nine months of its trading year, up from a loss of Kshs 257 million for the year ended.
Kakuru says their operations in Nairobi have succeeded despite the existence of a hyper-store, not far away from some of their supermarkets. “We are aware of what to do, and so as soon as they open, we’ll be ready for them,” he said.
The two giant supermarkets are likely to dangle all sorts of goodies at customers in the coming months as they look to keep their clientele happy. And whereas Uchumi says they are ready for the fight, the other Supermarkets like Game, Capital Shoppers and Shoprite, will be looking to get a big slice of the retail market.