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Cytonn report exposes emerging challenges in Kenya’s retail market

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By Caroline Theuri                                           

Despite the expansion ongoing in Kenya’s retail sector, the industry has not been recording a good performance economically.

According to a report released this Sunday by Cytonn, competition in the retail sector has seen the largest retailer in the continent, Choppies Enterprise, continue to close its Kenyan branches.

“Last week, the supermarket closed down its Kiambu Mall branch. A fortnight after, it had closed its Bungoma branch. The reasons that have been cited include low stocks and management issues,” says the report.

The Botswana-owned supermarket, which has branches in other counties in Kenya, such as Kisumu and Kericho, has been facing difficulties of late. Its Chief Executive Officer, Ramachandran Ottapathu, was suspended by the board two months ago.

The retailer’s failure to disclose its financial results last year also adversely affected its attempts to be listed on the capital markets in Botswana and South Africa.

The Cytonn report says Choppies has 210 stores spread across East and Southern Africa. As of June, it had 17 stores in Kenya since its entry into the market three years ago.

The report further says there are a number of factors that have been driving the growth of retail sector in Kenya. For instance, the increase in the number of people in the East African country is an indicator of the people who are likely to be able to have a purchasing power.

The entry of foreign investors into the field, such as Choppies, says another study by the Oxford University Group, has led to growth in Kenya’s retail sector, in addition to the high competition currently existing.

According to a recent report by Nielsen, titled ‘Shoppers Trends’, the country has had 54 percent of stores opened since 2014, raising the number of venues where consumers can access their goods. The Kenyan shopper is simultaneously brand-conscious but price conscientious.

“70 percent of shoppers are aware of the price, 95 percent are susceptible to the changes of the prices of goods and services, while 60 percent of grocery shoppers are bargainers,” says the report.

But the side-effect of this growth in the retail sector is that it has been able to curtail the spread of other Kenyan supermarkets such as Nakumatt and Uchumi.

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