In its rapid expansion, Naivas claims it has learnt from failed chains

 

In the midst of construction work at Hazina Towers in Nairobi, Naivas Supermarkets was busy opening doors to its 67th store in the country on November 24 last year.

Not the construction materials blocking the way and partly covering its logo at the entrance, the chilly morning weather or even the Covid-19 pandemic that had ravaged the economy for over eight months was going to get in the retailer’s way. Staff busied themselves placing products on shelves.

At the entrance, management led a ceremony to officially launch the newest baby - becoming the building’s anchor tenant, in the space that was until December 2017 one of collapsed Nakumatt’s most prime locations in the central business district (CBD).

“We realised that the upper CBD has been completely empty. There is no retailer serving clients around. Again, the shop was ready. People were hungry for this thing,” said Naivas Chief Commercial Officer Willy Kimani at the time.

This was a month and a half after the supermarket opened its 66th store at the Waterfront Mall in Karen, Nairobi, in the space South African retailer Shoprite occupied before leaving the Kenyan market, and days before it proceeded with its aggressive expansion to hit 73 stores by June this year.

In words, Naivas indicates that it is making slow, calculated moves by opening new stores strategically and avoiding expansion beyond a level it can manage.

But in action, Naivas has led an aggressive expansion over the past four years as it competes with other retailers to fill almost every space left by the failed Tuskys and Nakumatt.

Since January 2018, the retailer has increased the number of its outlets from 44 to 73. Its planned opening of new outlets in Githurai 44 and Kisumu later this month and the 77 outlets it aims to have by the end of 2021 will translate to a growth of 75 per cent over the period.

The supermarket chain’s obvious strategy has been going after what used to be Tuskys and Nakumatt outlets, facing competitors such as Quickmart and Carrefour, which have also been aggressively inheriting the collapsed retailers’ former stores.

Spaces so far taken over by Naivas that were previously occupied by Nakumatt include Prestige Mall on Ngong Road, Nairobi; South C, Nairobi since December 2017; West Side Mall in Nakuru, where it entered in December 2019; Mega City Mall in Kisumu; Likoni and Bamburi in Mombasa; and Hazina Towers.

Naivas’ aggressive expansion inheriting Nakumatt spaces had already gathered pace by 2017 as the former giant started faltering, and by January 2018, it had opened its 44th store at Development House on Moi Avenue. In total, Naivas has taken over more than 10 spaces previously occupied by Nakumatt.

“I would not want to be seen as if I’m happy, but any space that is available we will take,” Naivas Managing Director David Mukuha said in an interview in October 2017, as the retailer expressed openly its intent to take over and revamp all Nakumatt shells.

The Nation reached out to Mr Mukuha and Mr Kimani for comment on the chain’s expansion drive, but neither of them responded to our calls and messages.

Buoyed by capital injections from a consortium of investors who bought about 30 per cent shares in the retailer last year, Naivas has also been going after stores previously occupied by Tuskys, which since last year has closed most of its outlets at lightning speed due to cash shortages and growing debts.

In April, Naivas opened its 72nd branch at what used to be one of Tuskys’ most prime outlets in Nakuru, on Kenyatta Avenue. The outlet became its fourth in the cosmopolitan town and opened about three months after Tuskys closed. It was Tuskys’ oldest store, having opened in the 1980s, and fourth to be closed in the town.

Other spaces formerly occupied by Tuskys that Naivas has taken over include the 25,000-square-foot space at a building in Kilifi, where it entered in January this year following the exit of Tuskys in October last year.

The others are at Zion Mall in Eldoret in May and the planned entry at Simba Club Hall in Kisumu.

In the latest expansion move, the retailer on June 28 also took over 4,000-square-foot space formerly occupied by Tuskys on Muindi Mbingu Street in the Nairobi CBD, becoming its 73rd outlet in Kenya.

“Our style of governance has changed and is better, having taken lessons from the first three giant chains of supermarkets that have fallen along the way,” Mr Kimani said during the Nakuru opening in April.

The supermarket chain has been vocal that it will close any outlet that does not make business sense, while also indicating that its expansion strategies have been informed by proper market research and feasibility studies about the markets it is investing in.

“We have to make sure that every unit makes economic sense. We will not be shy from closing down any stall that fails to perform,” Mr Kimani said during the opening of the Hazina Towers store last year, adding, “We are making a measured approach by researching about sites before we move in.”

During the opening of the Waterfront Mall outlet in October, he had made similar comments, saying: “If a store does not perform, then it should actually be shut and we have not been shy to do so in the past. We shut down two stores in Makongeni and Githunguri. We shall not be shy.”

Naivas management insists they are not expanding blindly, seeking to allay fears that the chain could suffer the same fate as the fallen retailers.

By February last year, Naivas had 62 outlets, up from 55 in October 2019 and 44 in January 2018.

In 2017, the chain opened six new outlets, which rose to about 10 in 2019. This year, it is also expected to open more to hit a target of 77.

“Make calculated moves and ensure you take care of the businesses and the customers. Do not rush like the others,” Nation Media Group CEO Stephen Gitagama urged the retailer last year, as he led the opening of the Hazina Towers outlet.

Many have also expressed similar concerns following the downfall of various retail chains such as Tuskys, Nakumatt and Uchumi, which were at different times the biggest in the market.

The new outlets have been coming with hundreds of jobs, with each outlet employing as many 100 staff.

Every time a supermarket falls, the pain is felt by hundreds of workers who are rendered jobless, clients who go unserved and suppliers who are always left unpaid.

For instance, Nakumatt, which was officially liquidated last year, collapsed with debts of more than Sh35 billion owed to suppliers, most of which were small and medium-sized enterprises.

“We are here today launching our 72nd branch out of our target of 77 this year. We are very much informed about the market pattern and to say confidently, it is a well calculated and thought-out plan that I believe will survive for subsequent years,” Mr Kimani said during the opening of the latest outlet in Eldoret in May.

The retailer has grown from a simple family business operating in Rongai, Nakuru County, more than 20 years ago, having started with an initial capital of Sh200,000 by two brothers - David Muhuha and the late Simon Gachwe. Today, it is worth over Sh20 billion.

Mr Mukuha has also previously indicated that part of the retailer’s strategy is shutting down any outlet that makes losses.

“If you have 10 branches that are not performing, then you’ll be eating profits from other branches,” he said last year.

But the retailer has been reluctant to spread its wings across the borders, indicating that it first wants to capture the Kenyan market properly, which it insists still holds huge potential.    BY DAILY NATION