The BIG lie about Kenya’s mega retailers

The BIG lie about Kenya’s mega retailers

Nakumatt, with 63 outlets in three countries at its peak, looked like it was too big to fall. There were no red flags that Nakumatt Supermarket was on the verge of collapse.

Like the elephant on its logo, Nakumatt, with 63 outlets in three countries at its peak, looked like it was too big to fall.

But this was a BIG lie. By 2018, the retailer was a shell, its glorious years undone by untamed debt-fuelled expansion, poor business practices and monumental looting.

Even at its zenith when it opened branches at a dizzying rate and boasted having everything that shoppers needed, the retailer had very little assets and no products of its own on the shelves.

Nakumatt also had very little cash and cash equivalents of its own. Its balance sheet was inflated by suppliers’ and creditors’ money.

This is not just the story of Nakumatt, whose blue-themed brand has joined the ever-growing list of nostalgic products, but the sad tale of Kenya’s so-called retail giants that, unfortunately, continue to run like the dukas from which they were supposed to have evolved.

There are those who have learnt the hard way the metamorphosis of a typical supermarket in Kenya.

It ends in premium tears for small suppliers who have been the biggest losers in the collapse of Nakumatt. The story of supermarkets in Kenya is almost akin to that of pyramid schemes.

In the beginning, you have to pump in your money for the first branch, says a supplier who has been dealing with retailers for over 20 years and who requested anonymity as he still supplies many of them. He says he lost Sh100 million when Nakumatt went down.

With the first branch, a supermarket could easily make annual sales of Sh600 million.

Unfortunately, a turnover of Sh600 million is not enough to attract the “10 big boys,” including Coca-Cola, Uniliver, Bidco, Brookside, Reckitt Benckiser.To lure these big suppliers and enjoy massive discounts, you need bigger volumes.With a turnover of Sh600 million, you can approach the bank for a facility to open the second outlet. You will tell the bank that with a second outlet, you could easily do an annual turnover of Sh1.2 billion.Now with Sh1.2 billion, you the big boys can play ball. In addition to the backing of the big boys, you can also negotiate with suppliers for a longer payment period.After all, you have the goodwill of creditors and landlords who have made […]

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