Businesses & Financial News

Prospects good for retailers despite looming sector collapse

By Steve Umidha

Kenyan retail sector will accelerate in the next 12 months, helped by the gradual reopening of the economy and slow return to normalcy that had cooled due to the novel coronavirus pandemic, the industry lobby has said.

The Retail Trade Association of Kenya (RETRAK) in its Retail Industry Outlook Survey 2020 released Tuesday on Trends, Challenges and Future Outlook, projects a modest growth in the months ahead despite the pandemic pushing key players like Tuskys to near insolvency.

The survey conducted mid this year says majority of retailers are optimistic of the future growth in the with a good number also looking to open additional stores and business units as well as venture into eCommerce to complement their brick and mortar stores.

According to the survey, an estimated 47 per cent of retailers who took part in the survey are predicting a promising potential and constant growth with expansion of new branches is projected to be at 32 per cent for different retail subsectors.

The survey further found that majority of the retailers at 41.18 per cent will maintain the same number of stores but may compliment their excising stores with an online presence – while a quarter of the respondents, at 20.59 per cent will close some stores compared to some 11.76 per cent who said they were unsure of the future.

“These findings convey the message that the current retail sector is growing despite the poor economic conditions, inflation and now compounded by Covid-19 pandemic, thus retailers are opening new stores to avoid industry shake-out,” said RETRAK’s Chief executive Wambui Mbarire –whose organization comprises of 91 retailers across the country.

The report further notes that the prevailing Covid-19 pandemic will force most retailers to meet changing consumer demand for eCommerce adoption which has been on the rise as out of 42.4 percent of retail businesses are without an existing eCommerce store, with a good number at 30.3 per cent are currently implementing an eCommerce platform to reach consumers online consumers, while the remaining another 9.1 per cent will adopt an ecommerce platform within the next 18 months.

Kenya’s retail sector has expanded by 13 per cent hitting the all-time high in terms of spending by 1.8 trillion shillings, since 2016 according to a survey conducted by Proctor and Gamble (P&G).

Since then recent trends characterizing the sector reveals mixed fortunes with subsequent exodus of suppliers, unhappy over unpaid bills, tedious business permits left empty shelves in key retailer’s stores, as losses mounted.

Three weeks ago, Shoprite Holdings Ltd, Africa’s largest consumer goods retailer for instance said it will close and dispose of its remaining two stores in Kenya in the next three months — barely two years after its entry into the local market.

Indeed, the survey revealed that the retail sector is heavily regulated as setting up a retail outlet will require about 18 different licenses and permits with some mandatory like Single business permit and Fire inspection certificate, while others are based on business operations and include Fish trade license, KEBs certificate, Dairy board inspection, NEMA certificate among other documents like Loading Zone and Sign Boards.

“The two biggest challenges facing the retail sector according to the survey is Low economic growth 76.47 per cent and Government Regulation 61.76 per cent. This is replaced in slow GDP, inflation and now compounded by Covid-19,” noted the report.

Supplier debt coupled with a drop in business in the retail space, occasioned by Covid-19, has in the last two months threatened its business with the retailer forced to close some branches on reduced cash flow.

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