In Summary
  • The new business model, if successful, is likely to trigger a chain of reactions by other giant retailers, according to analysts as it will lead to a scramble for the majority low-end shoppers who mainly depend on the largely informal retail industry.

  • At least two stores running under the brand name Uchumi Xpress are already in operation, with more set to be rolled out.

  • One is located in the middle of Nairobi’s Mwiki estate in Kasarani area where it is competing for shoppers with local shops.

  • The Nation found curious shoppers streaming in signalling interesting times ahead.

Uchumi Supermarkets has begun testing a new franchising model ahead of a roll-out later in the year that is expected to offer private and mostly small supermarkets the opportunity to trade under its brand name as it seeks to spring back to profitability.

The new business model, if successful, is likely to trigger a chain of reactions by other giant retailers, according to analysts, as it will lead to a scramble for the majority low-end shoppers who mainly depend on the largely informal retail industry.

At least two stores running under the brand name Uchumi Xpress are already in operation, with more set to be rolled out.

One is located in the middle of Nairobi’s Mwiki estate in Kasarani, where it is competing for shoppers with local shops. The Nation found curious shoppers streaming in, signalling interesting times ahead.

Uchumi chief executive Julius Kipng’etich is, however, tight-lipped about these developments.

“We haven’t rolled out the franchises yet. We will be ready to talk about this in a couple of weeks so it would be too early to shout about it. At the moment we are setting up and testing the systems,” he said.

BIG BRAND

The franchise model in which a big brand allows smaller players to use its name in a particular market in return for royalties has been in operation in other sectors such as manufacturing, hospitality and transport with mixed results but is yet to be tried in the mainstream retail industry.

Nakumatt supermarkets, thought to target middle-class and high-end shoppers, prefers malls while Tuskys, Naivas and Uchumi, which target middle-tier shoppers, set up stores in areas with high traffic such as shopping centres or near bus terminuses.

The low-end market, which has for a long time been snubbed by the four retail giants but is increasingly becoming lucrative, is currently the playground of low-end tier retailers such as EastMatt, QuickMart, CleanShelf, GreenMart, Mulleys, Mathias and KassMart.

These retailers have been on an opening spree of stores in the estates and low-income neighbourhoods, bringing goods and services closer to the people and denying the giant retailers traffic.

It is this under-exploited “kadogo economy” that Uchumi is targeting by taking on kiosks and convenience stores but without overhead costs.

Tuskys had also announced that it would go the franchise way but its chief executive Daniel Githua was non-committal about it when asked about these new developments.

'THEIR PLAN'

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