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South Africa’s retail giant Shoprite plans to exist Kenya by December is the latest blow to hit the sector after multiple failures that have ripped up supply chains and left thousands of people jobless.

Shoprite’s exit will follow Botswana’s Choppies even as troubles within Tuskys and Uchumi abound, as closing of branches and lay-offs continue.

Earlier, Nakumatt went into liquidation, wreaking havoc across the country as producers and suppliers licked their wounds while staff endured months without pay.

The constant closures and exits of key brands that mark Kenya’s retail landscape have raised concerns whether there are underlying causes in a sector that have in recent years ranked among the most attractive in Africa.

Retail Traders Association of Kenya (Retrak) and Competition Authority of Kenya (CAK) said there are no systemic problems with the ecosystem. 

However, Kenya Association of Manufacturers (KAM) is calling for the strengthening of the sector’s corporate governance.

“There is no systemic failure because when one fails, two come in to take its place.

However there are issues such as governance that local retail stores face, for instance, during expansion from small entities to large outfits,” said CAK director general Wang’ombe Kariuki.

Wang’ombe said there is a missing link interms of management skills where owners of fast growing family-owned businesses appear to lose control once the ventures are nolonger startups.

Multiple branches

“May be I was running a shop and now I need to expand do I have the capacity to run multiple branches or I should continue running it like a grocery,” he posed.

The public has been treated to sibling fights over the management of both Tuskys and Naivas raising concerns on the management of fast-growing family businesses.

Players in the sector, however, say the problems are unique to individual stores and that the decisions to exit by foreign players had nothing to do with local circumstances.

“There are no underlying challenges. Shoprite is withdrawing from East and West Africa.

Choppies closed because its headquarters in Botswana decided against the expansion,” said Retrak chief executive Wambui Mabrire.

However, KAM boss Phylis Wakiaga says there is need for strengthening the sector’s corporate governance and having in place accountability and transparency systems to protect other players such as manufacturers.

“Additionally, there is need for the regulation of the credit environment in Kenya, to monitor the honouring of credit payment periods.Supermarkets engage in credit terms.

When they default, there is no regulatory body that steps in to address the concerns,” said Wakiaga in statement.

Kenya’s retail landscape has become very competitive with the entry of foreign players.

A Study done by the CAK early in the year showed that in Kenya, retail stores make a profit of three per cent from every good sold compared to the 6 per cent that supermarkets in other countries make.

This makes it a very delicate balance and calls on the management to be awake to all the risks.

Due to this, supermarkets have ventured into packaging of goods to increase their profit margins while hurting suppliers.

This tough competition has seen Shoprite and Choppies choose to exit the market as thin margins leave existing players with a myriad of challenges.

High cost of brick and mortar rental stores is also high with CAK saying that malls are paying upto Sh250 per square feet.

These prices in turn make the supermarkets to delay payments to manufacturers.

However, on the other hand, when one store shuts down or exits, competitors rush to take their spaces raising questions on whether the players are operating in the dark without data and due diligence.

Digital stores

Analysts hope that the growth in digital stores will help take off pressure from brick and mortar store prices to ease prices for retailers.

High competition on the supply side has also seen suppliers fall prey to struggling supermarkets who easily get new suppliers after falling out with their previous business partners due to delayed payments and defaults.

“While we have seen other chain stores expand, there still exists a gap to be filled since currently, supermarkets don’t have adequate coverage across the country,” Wakiaga said.