Retail Bulletin Issue 190, 8 February 2007

Kenyan-based Nakumatt is planning to open branches across East Africa as it lays out an aggressive expansion strategy. Within the next 12 to 18 months, the retailer is planning to open outlets in Rwanda's capital of Kigali, Uganda's capital of Kampala, and the Tanzanian cities of Arusha and Dar es Salaam. Following these openings, Nakumatt will be a true pan-East African retailer.

"We plan to expand to Kigali, Kampala and Dar es Salaam and Mwanza very soon. We also want to open branches in Meru and Nyeri, both in Kenya," said Nakumatt's IT director, Mr Sailesh Savani. Most of the new stores will be sized between 4,600 and 5,600 square metres. To facilitate this expansion and ensure smooth operations, the retailer also has plans to upgrade its IT systems.

According to Savani: "We are implementing Oracle retail and financial systems, phase one of which will be complete by the end of this year. This would see some drastic improvements in our supply chain management whereby our suppliers will have better visibility of stocks and sales of their relevant products, which would help in effective and timely replenishment to reduce stock outs. Over the next two years, we will be investing over USD4 million in upgrading our IT systems."

The retailer is gearing up to go public as it plans to be listed on the Nairobi Stock Exchange by 2009. Savani revealed the Kisii branch in eastern Kenya was among the best performing branches ever since it was opened. "Our goal is to increase our market share by reaching out to customers in the next three years," he added.

Comment by Planet Retail:

Nakumatt's plans to open in Uganda, Rwanda and Tanzania are ambitious for the region. Previously, only Kenyan retailer Uchumi had a foreign operation, with one store operating in Uganda's capital Kampala. However, following the financial collapse of the company and the subsequent closure of its Kenyan stores until financial intervention from the government, further ambitious expansion plans will have to be put on hold. With all other Kenyan retailers confined to their local market, Nakumatt will be the most expansive Kenyan retailer, ready to match the ambitions of South African retailers such as Metcash and Shoprite. Until now, these have been the only retailers in the region with the technical know-how and financial power to realise any expansion plans of this scale.

By upgrading its supply chain and technical systems, Nakumatt is building the support structure necessary to implement such an enlarged operation. Already operating with a sophisticated structure in Kenya, Nakumatt has the experience to facilitate its foreign ambitions. Certainly, Tanzania is a market where Nakumatt stores would find a large enough customer base, especially in urban centres such as Dar es Salaam and Arusha. In both cities, South African retailer Shoprite has already opened stores, but market sizes and economic stability suggest there is room for more.

With its existing stores performing well, and a sound investment strategy in hand to support its expansion, Nakumatt should be able to avoid the mistakes made at Uchumi, such as opening too many stores too quickly, without a proper financial basis. If the plans for openings in East Africa are realised, Nakumatt's planned listing at the Nairobi Stock Exchange by 2009 should be one event to celebrate.

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