Kenya-based Nakumatt Holdings is a significant player in East Africa’s retail sector, generating $700m in annual gross revenues. It employs 7,000 people at its 52 outlets in four countries across the region. And the retail chain has plans to become a $1bn-a-year company by 2017.[hidepost=9][/hidepost]
Over the next 17 months it intends to open 18 stores bringing its total footprint to 70, says Thiagarajan Ramamurthy, regional director for strategy and operations at Nakumatt.
Speaking at the recent East Africa Property Investment Summit in Nairobi, Ramamurthy gave insight into the key factors that have driven Nakumatt’s success.
He notes that much of the chain’s growth has happened in the last decade. From 1992 to 2002 only 10 stores were opened, but from 2003 until today it has established 42. And this year the retailer plans to open a further nine and has already signed leases for seven locations.
“How is it possible?” poses Ramamurthy.
“I’m never in the office. I’m in the market looking at locations. Give me 10,000 sq ft tomorrow… and I’ll open a [store].”
So how is it possible?
Ramamurthy attributes Nakumatt’s success to having an organised supply chain, local manufacturers and importers, and good retail locations. Kenya’s relatively strong financial sector has also played an important role in its growth.
He notes that differentiation is critical in the story of Nakumatt’s rise, and its pursuit to become a $1bn-a-year company. Running stores that are open 24 hours is one factor that makes Nakumatt different. When it opened the first 24-hour outlet Ramamurthy says he went to the store at 4am and there were only two shoppers. But the concept has since grown, with 11 Nakumatt stores across the region operating all day.
“Today that shop is doing 1,200 shoppers only at night. [Some] 55% of sales there comes from night shopping,” says Ramamurthy. “Night business is fantastic business for me.”
The retailer also operates portable stores dubbed ‘Nakumatt on Wheels’ (NoW), housed in 20-ft air-conditioned containers.
Another innovation includes the Nakumatt Global Card which doubles as both a loyalty and a pre-paid card. Users can top up money on the card and use it for shopping in Kenya and abroad. “You can load six currencies into this card and use it anywhere in the world… We will still give you Nakumatt [loyalty] points at no cost to the merchant, even when you make purchases abroad,” says Ramamurthy.
Nakumatt has also formed retail partnerships with multiple international brands including Revlon, Skechers, Clarks, L’Oréal and Disney.
Competition coming to the Kenyan market
But Nakumatt does face some challenges, including Kenya’s anti-GMO stance which forced the retailer to halt importation from some partners in the US. It also struggles to get goods into Tanzania where there are strict product registration rules.
Next month South African retailer Massmart will open its Game store at the Garden City Mall in Nairobi. Talk is rife that its entry will hurt local chains like Nakumatt. French retailer Carrefour has also signed up two locations in upcoming malls in Nairobi, one of which will open in September.
But Ramamurthy brushes off talk of losing out to the two new entrants, noting Nakumatt’s focus is on only 10% of the market which he estimates to be worth $7bn.