What is killing the Supermarket business in Kenya?

Peter Otieno ponders on what could be ailing the retail sector in Kenya and suggests a possible prescription
The term Supermarket refers to a well-organized self-serving retail store, where goods are sold in small quantities to the public for use or consumption.
Did you know that Ibrahim Supermarket was one of the first supermarkets in Kenya way back in 1944? They sadly closed their doors in 2019 after 75 years of existence in Kenya, having opened branches in Nairobi, Mombasa, Kisumu and Nakuru.

Ibrahim supermarket in the late 1990 was a popular retail store for both low- & middle-income earners.
Other well-known supermarkets which have also closed shop after serving Kenyans in the past include Jack and Jill and Ukwala the former being well established in Nairobi while the later had outlets in other towns in Kenya.

Jack and Jill shop in early 1990 the store was popular with low-income earners
In the recent past, giants of supermarkets in Kenya namely Uchumi, Nakumatt and Tuskys have also found themselves in the same predicament and have since closed shop. While these three giants were exiting the market, others were selling or rebranding. Tumaini changed hands to become Quickmart. Naivas started off as self-serving store in Rongai Nakuru in 1993, later rebranded to Naivasha Mattress before rebranding to Naivas in the year 2000.

The fall of Uchumi, Nakumatt and Tuskys in succession has left Naivas as one of the leading supermarkets in Kenya, probably in the African sub – Saharan region. The entry of foreign entities in this market in Kenya has revealed how tough this sector is. Of the three foreign entries, only Carrefour appears to have gotten the success formula, but of course, time will tell. Choppies and Shoprite both from South of Africa have come, opened doors and closed in the blink of an eye. As earlier noted, local brands like Eastmart and Tumaini either rebranded or sold off.

It will be interesting to watch how things evolve for both Carrefour and Game. The latter has been in this market longer than Carrefour but appears to take it slow in opening more outlets. Carrefour on the other hand appears to have stabilized in a short time and is opening more shops in Nairobi and Mombasa. The fastest growing by the number of traffic and out lets per month since 2020 has been Quickmart.

Other stores which have been in the market for long but have not scaled up in terms of outlet, include Chandarana, who have been in existence since 1980s but have since rebranded to Chandarana-FoodPlus.

The question in many people`s minds is what is really happening in the retail sector? Why are well-established stores getting swept out of the way and ending up dead? Why are these supermarkets going down with huge supplier monies yet in most cases they got goods for their shelves on credit or consignment that they sold for cash?
We cannot purport to know the exact reason why supermarkets come alive, make money then close shop without notice. Or why some supermarkets take so long to expand while others expand rapidly in a short time span. We do ponder about the reasons supermarkets prefer to sell on cash but pay suppliers on credit terms. One thing we do know for sure is that it is hell on earth to efficiently manage any retail store, leave alone a supermarket chain on manual basis.
Look at this scenario before the ’70s when the retail business was a manual affair. Shopkeepers would track stocks, sales and every other operation manually. Imagine a storekeeper keeping several hundred selling units (known as SKU-stock keeping unit) and each unit is being supplied by a different person. This situation was made worse by the fact that large entities (such as the large Supermarket) often had thousands of suppliers supplying all sorts of goods with each offering ten to thirty unique products. Throw in sale offers, discounts and price changes and you have a perfect recipe for mayhem. This scenario has been repeated over and over whenever retailers choose manual system or self-made internal systems.

A solution for the retail sector

There is one aspect we wish to highlight here which we believe could play a key role in helping supermarkets deals with their supply chain management or traceability of things. GS1 (One Global Standards) who are our sponsors over the years have developed a unique traceability code system to enable businesses and in particular retail industry manage stocks level in their inventory. One such code is known as GTIN – Global Trade Item Number. This is a unique code assigned to a specific product with uniqueness to that product is the silver bullet in traceability. This code once assigned to a product under strict GS1 parameters will give that product the uniqueness identification recognized world over and access to well-established retail out let any were in the world. There are over 114 GS1 licenses issuance agents in the world with its Global office based in Brussels Belgium. GS1 Kenya is one of the licenses issuance agents and it will issue specific codes to goods locally manufactured or those from neighbouring countries.

Generally, any good locally manufactured and bares GS1 Kenya Code will have a thirteen-digit code starting with 616 then ten other digits, for example. 616 00000 0000 0. How does this code work? The first three digits 616 Indicate the Issuance License agent in this case Kenya. The next four Digits .0000 and will hold 10,000 numbers that is 0000 to 9999 identifies the company producing the product (also called GCP-Global Company prefix) i.e., “Peter Limited”. The next five digits and will hold 100,000 numbers that is;

00000 to 99999…. identifies the product i.e., Tomato sauce 50g in Sachets. The last one digit will hold 10 numbers 0 to 9 is called the check digit and usually is generated automatically; this is one of the features that make GS1 codes unique. Scan this QR code to learn more how GTINs are allocated.

Each of the 114 issuance agents will have specific keys to identify them for example South Africa will start with 600. Scan this QR code to see Specific codes for other Issuance Agents.

It is our belief that one of the main contributors to stock shrinkage in the supermarkets is as a result of chaotic management of goods due to lack of implementing GS1 Standards. E-commerce platforms or the so-called market places such as Amazon, E-Bay, Alibaba and Google stores have all signed MOU with GS1 on a working formula. This has not only helped them manage their supplier list and inventory but has also helped them to manage recalls in-case of faults.

In 2013, the horse meat scandal in Europe relied heavily on media for recalls. The incident led the EU to enact regulations on how to manage supplies in the departmental stores and GS1 standards was adopted to manage such crisis. Scan QR code below to learn more about other GS1 Standards that might be of good use to your organisation. To help retail business grow in this region, GS1 Kenya in collaboration with a service provider CS-digital recently developed a retail platform known as THAMANI Online, a real-time payment platform. We believe this is the future of retail where suppliers meet the consumers directly.