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Walmart says it’s difficult to enter Nairobi market

Giant US supermarket Walmart is having difficulties entering the Nairobi market.

Competition for a slice of Kenyan retail “is so fierce that Walmart is already locked out of Nairobi’s next two big mall developments,” the Hub and Two Rivers Lifestyle Centre, a report in UK-based Financial Times has said.

“We should have been here a while ago but we just couldn’t get the deal right — unfortunately it’s taken us too long,” says Mr Mark Turner, marketing director at Massmart, the South African group in which Walmart bought a controlling stake in 2011.

Walmart, through its Game franchise has an outlet in Garden City on Thika Road but it will be dwarfed by new malls, one of which, Two Rivers will be the biggest in sub-Saharan Africa.

GROWING MIDDLE CLASS

The target market is Kenya’s growing middle class, who have been growing to an estimated 350 million people across sub-Saharan Africa.

“The middle class in Kenya is growing. It’s more appealing, it’s more sophisticated and it’s ready for formal retail,” said Mr Turner.

But competition is fierce, with French retail chain Carrefour and local supermarket giant Nakumatt offering rivalry to Walmart.

In both the new malls, Carrefour, the world’s second-largest retailer, will be the anchor tenant. All the malls are likely to have a far greater security following the 2013 terrorist attack on Westgate mall.

The FT says that Walmart’s move into Kenya “highlights the sea change in the continent, as a nascent consumer class expands and draws in foreign investors, who had previously overlooked the African middle class.”

NOTORIOUSLY DIFFICULT

“Although Kenya is richly coveted by retailers and the foreign investors who back them, entry into the sector is notoriously difficult, thanks to a series of tightly held family-owned supermarket chains and a dearth of affordable space,” says the report.

Walmart spent years trying to buy Naivas, Kenya’s fourth-biggest chain, before shareholder wrangling saw family members sue each other, putting a stop to the deal last year.

Walmart prefers greenfield retail space, and its presence in Garden City, which was designed by the same team that created west London’s Westfield shopping centre is a result of a $250 million development from private equity house Actis, which has a 60 per cent stake, along with CDC, the UK’s development arm, with 31 per cent, and the World Bank’s IFC.

SOURCE: Daily Nation