Foreign retailers flooding Uganda market
Posted Tuesday, March 20 2012 at 00:00
Retail market growth
Uganda has the highest rate of retail business growth in East Africa. Statistics recently provided by Mr Ali Mufuluki, the W-Stores chairman and managing director, indicate that Uganda’s retail business space has in the last five years been growing at a rate of 20 per cent compared to Tanzania’s 15 per cent, and Kenya’s less than 15 per cent. Rwanda and Burundi are growing at between 10 and 5 per cent. Uganda has in the last five years seen a rapid growth in retail businesses including; supermarkets, clothing lines, eateries and restaurants, boosted by an improved economic environment that has silently led the expansion of the country’s middle class that is desirous of quality consumables.
Asked about supplying goods on credit and getting a 90-day period to repay for them, Nakumatt Marketing Co-ordinator, Renson Matundura, argued: “We have internal mechanisms on the payment of suppliers. Those who supply under consignment are paid immediately after the end of every month. Those under normal supply (LPO) are paid depending on the signed agreement by both parties.”
Kenyan supermarkets started increasing within the East African Community (EAC) since 2002 and have since kept pace in penetrating the regional market. The three largest Kenyan supermarkets: Nakumatt (3), Tuskys and Uchumi have a combined total of seven branches in Uganda.
Uchumi and Nakumatt supermarkets for example still have expansion plans this year in what they call a ‘brimming resourceful’ Uganda. They are also expanding into the outskirts of Kampala where there is more room for growth in order to reduce on congestion in the city.
Uchumi plans to pitch camp at Freedom City, Entebbe road in a month’s time and in Nateete before May this year. Nakumatt—the fastest growing retail chain in East and Central Africa—targeting middle and upper income earners plans to open two supermarkets this year. The first should be open in Mbarara by June and other in Entebbe before the end of this year.
The major driving force of expansion here is Kampala’s shifting retail landscape. Nakumatt and Uchumi argue that much of their expansion is driven by the convenience in the stores. Uchumi Supermarket Country Manager Jeff Nchaga says that the change in Uganda’s consumption trends and growing business has propelled them to move that way. “There is a considerable change in Ugandans’ consumption trends and we are reacting to this growing demand in form of more stores.”
“Ugandans have learnt about one-stop shopping points and most now want to access everything at the same place,” Mr Matundura said. These supermarkets have managed to stave off double-digit inflation, weakening currencies and rising interest rates by concentrating on products that people can hardly do without.
“What has kept us in business is concentrating on fast moving items because in difficult times like these, people only focus on the basics that leave the shelf very fast,” Mr Matundura said.
Their survival strategy just in case they expand and consumers reduce Mr Wiseman Mwaniki, the Deputy Manager at Nakumatt says that the business intends to spread the purchases between stores.
But the problem here is one. “This might weaken returns,” says Mr Oumo.
However much these investors are contributing substantially to this country’s growth, the local business community is dissatisfied, saying that the country will soon be run by foreigners. Nakumatt for instance, has more expatriates than Ugandans as employees.
“Out of the 350 employees, 32 are Ugandans and the remaining 318 expatriates,” said Mr Matundura.
With stiff competition, retailers are looking for the best spots outside Kampala to get the best out of consumers’ spending. But woe unto them should they fail to do well because they will have to pay their landlords.
So how is the competition being handled? “We have managed to acquire and retain our target clientele ‘Class A, B, C1’ by making sure we are always ahead of our competitors. There are so many elephants in the field, only one leads,” Mr Matundura argued. The target clientele constitutes the people who are not really hard hit by inflation, Mr Matundura added.
The issue of foreign supermarkets expanding faster than the local ones may question the business acumen of Ugandans. But the truth lies in the reasons that make these megastores score better in terms of doing business in this country.