Why supermarkets will keep churning out new stores despite e-commerce growth


Why supermarkets will keep churning out new stores despite e-commerce growth

In Summary

  • According to a new survey by the Retail Traders Association of Kenya (RETRAK) published on Tuesday and from which a majority of respondents were supermarkets (37 per cent), 32.4 per cent of retailers have made plans to open new branches.
  • Further, 41.2 per cent of respondents indicate they will keep the same number of physical stores while only 20.6 per cent of respondents indicated plans to shut down outlets.
  • Already, retail chain operators such as Naivas and Quickmart, while backed by significant working capital investments appear to be in a race to cover the entire country opening branch after branch almost every other week.
   

Supermarkets and other retail stores are expected to keep churning out new branches over the long-run in spite of ongoing transformation to e-commerce.

Already, retail chain operators such as Naivas and Quickmart, while backed by significant working capital investments appear to be in a race to cover the entire country opening branch after branch almost every other week.

While the transition to e-commerce takes effect in the trade subsector, players argue brick & mortar outlets remain as important as ever before.

According to a new survey by the Retail Traders Association of Kenya (RETRAK) published on Tuesday and from which a majority of respondents were supermarkets (37 per cent), 32.4 per cent of retailers have made plans to open new branches.

Further, 41.2 per cent of respondents indicate they will keep the same number of physical stores while only 20.6 per cent of respondents indicated plans to shut down outlets.

RETRAK Chief Executive Officer Wambui Mbarire says the physical outlets remain integral to the growth of the retail sub-sector.

“Brick & mortar and e-commerce will complement each other. For me, e-commerce remains a Nairobi headache. In the City, you can use google (maps) while upcountry you may have to rely on signages such as kiosks and power lines to reach customers which becomes difficult,” she said.

“None will run the other out of business. For physical stores, it’s about touch and feel. Take for instance you are buying a music system- you will want to test the bass, for ladies, one may want to try out the dress they seek to buy.”

The association’s Chairman and Naivas Chief Operating Officer Willy Kimani  indicates e-commerce still has tethering issues to sought before it becomes a fully fledged platform for players or even a competitor of brick and mortar establishments.

“The growth of e-commerce is a necessary evil. To be honest, we don’t like it and are even yet to break even on the platforms. The last mile remains a headache. There remains gaps on the backend and product mix,” he said.

The new sector findings come as players hold out for a rebound following significant disruptions arising from the COVID-19 pandemic.

According to RETRAK’s survey, the retail business has remained depressed by COVID-19 mitigation measures with the downturn in the general macro environment for instance diluting consumers buying power.

Government regulations further remain an ongoing hinderance in operation with the average business reporting the requirement of 18 licenses and permits to keep their doors open.

The retailers are however hopeful for a timely bounce supported in part by the continued ease of COVID-19 restrictions with curfew hours for instance shifting from a 9pm start to 11pm effective Tuesday night.

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Story By Kepha Muiruri
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