the makings of a local giant

THE MAKING OF A KENYAN WAL-MART
NAIROBI – Just outside the Nakumatt offices on a quiet dusty road off Mombasa Road, stands an imposing sculpture of an elephant. Probably in this building, nothing else gets more prominence than this signature. Several of them seat on a large cabinet next to the Operations Director Mr Thiagarajan Ramamurthy’s desk. Could be a sign of motivation, or a believe maybe, but Mr Ramamurthy talks in a quiet, deliberate tone, as he explains the making of the fastest growing retail chain in Kenya and the region. “You win in business only when you win the hearts of the customers,” he says. “Retail business is a service business where you need customer support.”

To many, the rise of Nakumatt came as a surprise. A small family business, it started out in the small, Rift Valley town of Nakuru and found its way to Nairobi to become the largest and the first retailer to introduce the hypermarket concept – all-under-one-roof. It has grown 150 percent in the last three years.

A recent survey by Planet Retail of UK ranked it 25 th among supermarket chains in the Gulf and Africa. The company is ISO certified, and has been awarded for two years running, the Most Respected Company in East Africa award in the services sector in a ranking by Nation Media Group and PriceWater Coopers – East Africa’s Most Respected Company Awards.

Mr Ramamurthy says Nakumatt stands to gain more awards in future for their innovation and creativity. His strategy? “You need to have a clear-cut concept in your mind,” he said in an interview with Smartbiz Africa. He talks sturdily about fundamentals for a company in the services sector, like strategic locations, pricing and value proposition. “You need to know what kind of service you are offering to the people, and consistency. And then, corporate governance, which is very critical to the business,” he says. Other things like Corporate Social Responsibility (CSR) and partnerships are vital. The company, for instance, gives out Kshs5 million every back-to-school periods, provides lighting around their stores, among others.

Round-the-clock shopping

Nakumatt recently introduced 24-hour shopping, by opening up its Ukay branch in Westlands, Nairobi, to shoppers around the clock. This makes the first one in Africa, and Mr Ramamurthy says they are watching the response before opening up more stores. “In the first month, the response is very positive, and it is a motivation for us to move on,” he says. “More than 1,000 people buy between 9pm and 6am every night, and the basket value at night is more than the day at the shop.” Nakumatt has also maintained same prices across the country, a unique feature in retail where many charge differently in different branches.

Standing at 19 stores, seven in Nairobi, two in Mombasa and others in major towns like Kisumu, Kisii, Eldoret and Meru, majority of which are hypermarkets, the company handles 250 categories of more than 55,000 products. Established 25 years ago to acquire its brand name in 1992, its first branch, now Nakumatt Mega located on Uhuru Highway, is the largest measuring 14,400 square feet, from 4,000 sq-ft at inception. “We do not import anything by ourselves,” says Mr Ramamurthy. “We put money only in two areas; getting the products available, and having them available all the time.”

In developing countries, he says, the fundamental thing is logistics. Not all the products are manufactured locally, so they have to be imported. Nakumatt, for instance, serves more than 165 nationalities, each with different needs. The trick is travelling extensively to countries, identifying some of the products and categories with significance, and partnering with importers. Taking care of employees is another winner. Apart from fair wages, his 3,300 workers enjoy other benefits like free lunch, uniforms and one month bonus that help in building loyalty. The company targets to raise employees to 5,000 in two years. To boost skill development, it is also working with a local university to promote a diploma course in retail management.

Giving extra to customers

Partnerships like, for instance in Nakumatt’s case with financial services providers, also chip in. All their tills are like ATMs, thanks to partnerships with banks like Barclays and recently, Equity Bank. The Nakumatt Barclays Visa Card has more than 10,000 holders. “People use the Visa Card constantly to support certain brands,” he says and it comes with benefits not available with other cards. The company is looking at other markets to venture into, starting with Uganda, where plans are under way to launch in Kampala in April next year, before proceeding on to Rwanda and Tanzania before December 2008. Six branches are also to be opened in various towns in Kenya, in the next 12 months.

Someone would say the expansion is too fast, given examples of supermarkets that have found themselves burning their fingers, like one-time retail giant Uchumi Supermarkets. But Mr Ramamurthy says a retail business has to grow to sustain costs. “As we look at expanding and providing variety, there are a lot of investments that are taking place,” he says. ” It is a people driven business, and all the time you need to increase the number of customers coming in. You can’t do it in one branch.”

Allegations of tax evasion in Parliament sometime back dealt the company a public relations blow. But Mr Ramamurthy came out fighting. He says Nakumatt paid Kshs600,000 million in taxes to government last year and could pay Kshs10 million more this year. At the end, he says there are a lot of local supermarket chains that have a lot to gain from the economic growth and the retail explosion. Nakumatt, a Kenyan Wal-Mart? “Yes,” says Mr Ramamurthy, adding they plan to list on the Nairobi Stock Exchange in June 2009. “When we go public, when shoppers become part of us, then Nakumatt’s growth will simply double.” It will have a stronger muscle to bargain in terms of prices and become, what do we say? A Kenyan Wal-Mart?”

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