Who will benefit from Nakumatt’s problems?

The exit of cash-strapped Nakumatt Supermarket from some malls is turning out to be a boon for its competitors. 

Already, some retail players have quickly filled up the space left by the ailing supermarket. French retailer Carrefour is leading the onslaught, aggressively going after the spaces left by Nakumatt.

Carrefour, which has a store at The Hub in Karen and Two Rivers Mall along Limuru Road, will open its third store in the country at Thika Road Mall (TRM) after Nakumatt vacated the 5,000 square metres mall. 

“The opening of our third Carrefour store in less than two years of operations illustrates our ambitious growth and expansion plans in the region,” said Franck Moreau, the country manager at Al Futtaim Retail (Kenya).

“This new hypermarket will offer our customers who use the busy highway access to a wide variety of products at the most competitive prices, offered at world-class standards.”

Carrefour was able to shrug off stiff competition from Naivas Supermarkets which was eyeing the space left behind by the falling giant.

Naivas is the third largest local supermarket chain after Nakumatt and Tuskys.

Naivas Managing Director David Mukuha thinks they lost a rare chance to continue their growth plan. “That was our market, I know it very well,” said Mr Mukuha, noting that unlike Nakumatt and Carrefour that serve mostly high-end consumers, they have carved out a niche for serving low-end and medium consumers.

He was, however, categorical that the relations between Nakumatt and Naivas are still cordial.

Lease agreement

“I would not want to be seen as if I am happy, but any space that is available we will take,” said Mukuha in a telephone interview with Weekend Business.

Nakumatt’s space at NextGen Mall, along Mombasa Road, has already been snapped up by little known Souk Bazaar.  

NextGen Mall owner Navin Shah told Weekend Business that the retailer will be opening its doors next Saturday on a 20-year lease.

But the fight to inherit Nakumatt’s lucrative space between Naivas and Carrefour might not end with TRM.

The two are likely to spar again for the space left behind by Nakumatt after the latter was hounded out of the Junction Mall after failing to pay rents running into millions.

“Take notice that Nakumatt Holdings Ltd has relinquished its rights over these premises pursuant to a surrender dated September 15, 2017,” read a notice from The Junction Mall’s management. “The premises will be closed to the public from 0ctober 1, 2017 and no trading will be permitted at the premises.”

Unconfirmed reports indicated that the Ndegwa family had given the space to Carrefour following what it termed as Nakumatt’s failure to comply with a lease agreement the two had struck.

Nakumatt has since taken its grievances to court, with the management at the Junction Mall restrained from evicting them from the mall.

Carrefour, which so far has restricted itself on the leafy suburbs of Karen (Hub) and Two Rivers Mall (Runda), is better placed to fill up Nakumatt’s space at Junction.

Other foreign retailers in the market such as South Africa’s Wassmart through Game, currently at Garden City, and Botswana’s Choppies, which acquired 10 stores from Ukwala Supermarkets, have largely been silent.

However, Naivas says it is ready to take up the space. Although the supermarket has gained a reputation for operating as a “big duka”, Mukuha, who is also the co-founder of Naivas, said they have since conceived a new business model that will allow them to “accommodate” even the high-end consumers.

He gave the example of a new branch they have opened along Kiambu Road which he says is doing exactly that. “So that even if I am given Junction, I will do something similar,” he said noting that concept has been successfully used in Europe and North America.

So far, besides NextGen, TRM and The Junction, Nakumatt has also shut down its stores on Ronald Ngala and Haile Selassie. Nakumatt Westgate store will also be closed. In a notice to its customers, Nakumatt management directed its customers to the nearest stores, including Nakumatt Ukay, Nakumatt Highridge and Nakumatt Village Market.

The retail chain with a reported massive debt of around Sh30 billion also risks being evicted from Hazina Trade Centre which could open up prime space for deep pocketed retailers to expand.

More closures

In Uganda, the retailer has closed its stores in Acacia Mall; Kololo, Village Mall, Bugolobi, Victoria Mall, Entebbe and Katwe.

And despite a pending merger with Tuskys which is supposed to offer a fresh lease of life for the cash-strapped retail chain, most Nakumatt branches are still running on empty shelves.

Employees are getting jittery, going for months without pay. And landlords who are losing millions from unpaid rents are getting impatient.

And with the merger between Tuskys and Nakumatt said to be on the rocks, things could get more difficult for Nakumatt, resulting in more closures.

Other local retail stores that are also keen on expansion include Chandarana and Eastmatt.

Local chains, however, are cautious of jumping on the opportunity since they are well aware that the expansion binge may have played a big role in sinking Nakumatt.