Retailing in Kenya continues to expand
Kenya’s retailing industry continued to experience considerable growth over the review period. This can be attributed to increased purchasing power among Kenya’s middle class and upper class populations. Other key factors include improved infrastructure, which has facilitated the movement of goods and meant higher quality at lower prices. In addition, the sustained property boom had allowed retailers to establish outlets prime locations near residential neighbourhoods, offering more convenience to consumers. Retailing in Kenya is thus on an upward growth trajectory, especially supermarkets.
Formal retailing growing while informal retailing maintains a strong position
Kenya’s formal retail industry has grown substantially in recent years, with rapid outlet expansion in residential areas due to the country’s recent property boom. The role played by various regional governments to ban street trading and revitalise and encourage investment and the application of modern trading standards in retailing have not, however, led to the complete overhaul of the informal retail sector. Informal retailers in Kenya include traditional open air markets, kiosks, small corner shops and street traders, all of which are very popular and conveniently provide a wide array of products, making them easy to access. In the overall retailing industry, the influence of formal retailing is expected to grow over the forecast period. During 2013 and 2014, Kenya is set for a major retail boom with the entry of four global retail chains. Retailers such as Wal-Mart—present in Kenya through its South African subsidiary, Massmart—Game Stores, Jet and Edgars plan to open retail outlets in Kenya, further intensifying competition in retailing in Kenya, while local formal retailers Nakumatt, Tuskys, Uchumi and Naivas continue to expand.
Change in the range of products stocked by grocery retailers
Kenya’s traditional grocery retailers have recently increased the range of non-grocery items they stock on their shelves. This is the result of several factors, notably the increased levels of competition coming from formal retailers as well as the ongoing increases being recorded in the purchasing power of the average Kenyan household as a result of rising economic and investor confidence, which is promoting increased consumption. In particular, Kenya’s telecommunications, transport and property sectors are booming. This is largely responsible for the re-emergence of Kenya’s middle-class, many of whom demand more than the usual grocery items. In addition to groceries, grocery retailers also sell items such as clothing, consumer electronics and appliances, books, toys, personal and home care products, as well as household furniture and furnishings. In a bid to retain their earnings and remain competitive they thus offer a variety of products to their customers over and above the regular grocery items.
Aggressive competition promotes great innovation among retailers
Over the course of 2011 and 2012, Kenya’s formal retailers registered substantial expansion in the number of outlets, with the target of this expansion middle-class consumers and affluent consumers living in upscale residential areas. During this time period, more than 20 retail branches opened in Kenya, widening the presence of these formal retailers. In a bid to promote consumer loyalty and increase revenues, Kenya’s nascent supermarket chains are packaging and branding their own private label products. A recent increase in the adoption of online retailing platforms and the enduring popularity of home shopping represent innovative ways in which retailers are maintaining and increasing their value shares. Kenya has always been a challenging country for foreign investors. Several foreign retailers such as South Africa-based Metro Cash & Carry and Lucky 7 exited Kenya in 2005 after brief stints in the country. The limited success of foreign companies in Kenya’s retail industry has been attributed to strong competition, insufficient and expensive suitable locations for retail outlets and inadequate launch strategies, among other factors.
Strong growth expected in retailing over the forecast period
The Kenyan retailing industry is expected to experience strong and steady growth during the forecast period. The large and growing Kenyan population is set to provide steady and ever-growing demand for retail products. In addition, the anticipated entry and expansion of international retailers is set to continue driving growth over the forecast period. The increasing rate of urbanisation, rapid growth in the Kenyan middle class and rising demand for specific goods and services are set to combine with the Kenya’s overall positive economic outlook to boost growth in retailing in Kenya during the forecast period.
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