Curtain falls on Shoprite Naalya, what lies ahead

In 2011, when Metroplex Mall opened along the Northern Bypass, shoppers marvelled at the gigantic complex situated at the very heart of new upscale Kampala suburbs.
Its anchor tenants, Shoprite, realised an instant bump in sales as shoppers streamed in to sample the mall’s vast range of amenities, including children’s play areas, clothing stores and a 3D cinema.
Tenants, most especially Shoprite, had banked on the anticipated growth in traffic on the Northern Bypass amid mushrooming upscale suburbs in Naalya, Kiwatule and Namugongo, among others.
The new outlet was the third of the South African retail giant but the first out of the metropolis.
But about a week ago Shoprite Naalya put a bolt on its operations after four years in the market.
The outlet, analysts say, had failed to meet key sales targets amid growing competition and hard economic times.
“The Metroplex closure (Shoprite) boils down to several factors but the most immediate is location. Shoprite’s branches in Lugogo and the central business district are doing well because they are strategically located. The move to put a branch on the outskirts was a bet that never paid off,” Thomas Okot, a retail market analyst, opined when asked about the matter.
However, Okot said Shoprite was also facing aftershocks of a competitive market that had attracted many new players.
Shoprite was the first chain store to open a non-membership outlet in 2000.
Before then, South African retail chain, Metro Cash & Carry had operated a membership shopping outlet in Lugogo, Kampala, which closed in the early 2000s.
When contacted for this article, the Shoprite Uganda country manager, Jayte Slabbert, declined to comment, refereing this newspaper to the company’s headquarters in South Africa.
However, emails to Shoprite communications officers, including Mandy Janke and Sarita Van Wyk, all returned out-of-office notifications with telephone calls to known contacts failing to connect through.

Ordered to open
On Friday, Nakawa High Court ordered management of Shoprite to remain open until June 18 pending hearing of a case in which Metropolex Shopping Mall is contesting closure before the expiry of a tenancy agreement.
The ruling came after Robert Bautu, filed an application on behalf Metroplex Shopping Mall saying his client has a special tenancy agreement with Shoprite and if it is allowed to close prematurely he will be grossly affected. The outlet was still closed by press time.

Bad location
One should note it is not the first time a large supermarket outlet has closed.
At the close of last year, two large outlets operated by Uchumi (Freedom City Najjanankumbi) and Tuskys in (Bwaise) closed with Uchumi, specifically saying the outlet had failed to break even due to poor location.
“The location was not a prime area for doing business,” Jonathan Ciano the Uchumi Group chief executive, told this newspaper then.
Thus the closure of Shoprite Naalya could be a move, analysts believe, to realign the chain’s business operation since Uchumi has since said it would identify other prime locations to open three more stores in Uganda.
Putting it in perspective
The biggest threat of all this is job loss since no formal communication about the future has been provided to the more than 100 employees since May 24 when the outlet pulled the plug on its operations.
“They (Shoprite management) have not given us any information about our future. The only thing is they notified us early in the month that the outlet would close,” a former teller told this newspaper on condition of anonymity for fear of reprisal.
Previously, when such closures would happen, for instance at Uchumi, affected staff would be absorbed in other outlets but the key question here is can the two Shoprite outlets absorb the more than 100 people previously at Naalya?
Slabbert refused to discuss the matter, saying “there was a way forward awaiting communication from South Africa”.
He also dismissed claims the store had closed without paying some suppliers, saying: “No issue had been left unhandled before the closure and those which are still pending might be due to paperwork.”

Partial regional exit
Last year, Shoprite sold three of its outlets in Tanzania to regional retailer Nakumatt Holdings with the EastAfrican newspaper reporting there were talks relating to a possible exit from Uganda.
However, the retail chain denied the existence of such talks but remained tight-lipped over continued media reports it was looking for a buyer.
The above notion is supported by Okot, who says: “Shoprite might be planning to quit East Africa to consolidate its footing in other countries and back home in (South Africa).”
Shoprite had stores located in Mlimani City Mall and Puga Road, both in Dar es Salaam and another in Arusha. The deal was valued at Shs30b.
In the region it is only in Uganda where Shoprite still has a presence.

Tough economic times
For almost five years, Shoprite operated like a semi-monopoly with no major competition until the entry of Uchumi at the close of 2005.
Uchumi’s entry lifted the bolt on an almost closed sector, allowing the entry of more players such as Capital Shoppers, Quality, Nakumatt and Tuskys.
This meant tight competition, not considering slow growth in Uganda’s urbanisation and the country’s middle class.
According to figures provided by National Planning Authority, Uganda has less than three million people in the middle class category, which does not compare well with the fast growing retail sector.
Equally, the economy is facing a number of challenges, among them high interest rates, high inflation and the ever volatile exchange rate regime, which have far reaching impact on consumer prospects.

Good group performance
But amid all this the retail chain owned by Shoprite Holdings, reported good profits, posting a 6 per cent growth for the year ending June 2014 from Shs1.3 trillion in 2013 to Shs1.4 trillion.
Audit analysis attributed the growth to robust performance non-South Africa operations, especially in Southern African and the Indian Ocean Islands.
The group operates more than 1,200 corporate and 270 franchise outlets in 16 countries across Africa and the Indian Ocean Islands with the bulk of these located in South Africa.
There was also significant growth, with its turnover increasing by 10.5 per cent to Shs25 trillion with headline earnings per share growing 3.3 per cent.

View from a customer

Kenneth Mushabe, 40, says he has been shopping at Shoprite for more than a decade but was surprised by the closure of the outlet in Naalya.
“I stay in Kiwatule, and I had found the Metroplex outlet convenient,” he says. “I think their pricey products pushed people to cheaper options. Most of their products are from South Africa and seem more expensive compared to other supermakets.”
Mushabe’s argument raises key concerns since supermarkets here import at least more than 50 per cent of their stock.
In a mini survey conducted by this newspaper, foreign and local supermarkets import much of their stock even for items like oranges not considering telling research of good growth.
In 2012, Uganda was ranked as having the highest rate of retail business growth in East Africa in research commissioned by the W-Stores, a clothing retail business based in Tanzania.

About Shoprite
How it started. Shoprite, which until the closure of the Naalya outlet operated three outlets in Uganda has a presence in 16 African countries and the Indian Ocean Islands. The group operates more than 1,200 corporate and 270 franchise outlets with the bulk of these located in South Africa

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