Lessons from exit of foreign-owned supermarkets

The media, especially social media, has been awash with stories and reactions about the intended exit of Shoprite and Game Stores supermarkets from the Ugandan market. 

The exit of the two supermarket chains follows previous exits of other foreign-owned supermarkets, including Uchumi, Nakumatt and Tuskys.  

Reports indicate that Carrefour will take over six Shoprite stores in Uganda. Carrefour, one of the biggest retail store chains in the world with origin in France, already operates two stores in Uganda.

The discussion on what the exit means for the Ugandan economy has been going on, especially on Twitter.  On September 7, @TimKalyegira wrote: “Shoprite, Game, Pep Stores, Etihad Airways, Nakumatt, GulfAir, Uchumi, Steers, British Airways, Shell, Barclays, Nando’s, Tuskys, Orange, now Africell - all leaving the Ugandan market since 2012. Are all these international, regional brands failures or is Uganda’s economy weak?”

The challenges of the Ugandan economy and Covid-19 effects notwithstanding, I believe there is still a lot that is within the control of the individual businesses. Let me share why I think the foreign-owned supermarkets are failing in Uganda and what new ones such as Carrefour need to do differently to survive. 

The middle class in Kampala seems to be overrated. The number of people in Kampala who have enough money to do regular shopping of expensive items is still low. Most middle-class shoppers still buy more of essential goods for their survival. 

Enough focus, therefore, needs to be put on the essential groceries to drive sales and profitability.

Shifting of the shoppers to the outskirts. Gone are the days when people would drive to the city centre to do shopping over the weekend. With so many shopping centres opening up in the outskirts of Kampala and Wakiso, it is no longer necessary for one to come to the central business district to do shopping. The major supermarkets, however, have not shifted with the population and buying trends. Places such as Kira, Najeera and Namugongo are likely to have more shoppers than many locations in CBD.

Foreign-owned supermarkets tend to do relatively more importation than their locally owned counterparts. The imported products are more expensive than the locally produced items. Whereas the imported goods may be perceived to be of a high quality, our market is still price-sensitive and will, therefore, follow where prices are lower.

E-commerce revolution

With the advent of online shopping and delivery services, there is a need for supermarkets to seriously consider integrating e-commerce in their operations. Companies such as Jumia and Kikuubo Online have introduced convenience that shoppers are taking advantage of. Moreover, shoppers are able to compare prices online and choose the cheapest. Local supermarkets need to have a plan for this particular challenge as well, because the future is online.

With the emergence of so many supermarkets in all the outskirts of the city, the big players need to explore offerings for value-added services and ensuring a delightful experience to customers. There is a need for repositioning to offer services small shopping stores may not offer. 

This can be done by investing in research to know the behavioural and psychological aspects of a Ugandan shopper. Why should a customer be forced to drive more kilometres to come to your store? 

Nicholas Aruho, Economist 

Twitter: @NicholasAruho