Shoppers at Carrefour Hypermarket in Karen./ENOS TECHE.
Analysts have projected a brighter 2018, with local retail stores expecting stiff competition from international brands entering the market. International retail stores increased their footprint in the country in 2017, with Carrefour opening two more branches at Two Rivers and Thika Road Malls.
Botswana supermarket chain Choppies Enterprises took over Ukwala Supermarket in a Sh1 billion deal sealed in May 2017, and is targeting to penetrate rural Kenya.
In October, the budget retailer announced plans to open 40 more stores in Africa by mid-2018 at a cost of $29 million (Sh2.9 billion). Woolworths and Game have also expanded, targeting high end malls mushrooming especially in Nairobi.
A recent retail sector report by Cytonn Investments indicates that Kenya has recorded rapid increase in supply of retail space, with Nairobi alone recording a 41.6 per cent increase in supply every year for the past three years. Some of the malls that opened less than 18 months ago includes Two Rivers, Rosslyn Riviera and NextGen Mall on Mombasa Road.
High supply led to lower occupancies and lower asking rents which led to a decrease in returns with the average rental yield declining in the whole market to 8.3 percent in 2017 from 8.7 per cent in 2016.
The year saw local leading brands, Nakumatt and Uchumi Supermarkets close several branches as outstanding rental debts left landlords with little else than push out a number of these supermarkets, and close to Sh40 billion in supply and loan arrears, according to Kenya Retail Sector Prompt Payment report released in September.
The closure of Nakumatt Ronald Ngala and Nakumatt Katwe in Nairobi and Kampala respectively seemed to have opened the retailer's pandora's box as other branches closed in quick succession.
The future of Nakumatt now hangs in the balance with its hopes of getting rescued by Tusky's Supermarket blown away by the Competition Authority of Kenya which rejected the proposed merger.
The regulator argued the application submitted for regulatory review was done under the wrong clause of the antitrust law. It however advised the two retailers to make a fresh application or an exemption from regulations on anti-competitive behaviour rather than approval for the merger.
Uchumi Supermarkets had a rough 2017 occasioned with branch closures, court battles with suppliers, and employee strikes. However, the giant retailer has shown signs that it may come out of the woods this year, thanks to the late government bailout of Sh700 million that saw it restock most of its empty branches starting early December.
The listed retailer is also expecting to nail a strategic investor ready to pump in Sh3.5 billion in addition to Sh3 billion expected from the sale of its prime land in Kasarani, Nairobi.
“We have a willing buyer and we are closing in on the Sh3 billion land deal, hoping it will help us bounce back,” said Andrew Dixon, the firm's chief operating officer.
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