Despite the rough patch the regional supermarket chain Nakumatt is currently experiencing, we have been assured that its Rwanda franchise is stable and managing its obligations.
The reassurance is in line with signs in the local and regional market which remain healthy. This is witnessed by the blossoming of the likes of Simba Supermarket in Kigali, or the eager coming to Nairobi of global brands such as the French Carrefour and the Southern African Games Stores and Choppies.
Except for Uchumi, other major Kenyan brands – Tuskys in Kampala, for instance – are, for all we can tell, doing just fine.
But all of them are brick-and-mortar enterprises, as opposed to the online stores.
However, the game has changed. One can buy a 2kg packet of unga (maize flour) or pizza over the internet and have it dropped at your doorstep.
One would have thought such consumables were profitably the province of a walk-in shop. Not anymore.
Online enterprise down to the minutest of household goods or groceries is the other prong that has been gaining ascendency. Some would even say it is now quite entrenched among local millennials (20 – 35-year olds) as a market segment.
The operative business concepts are convenience and trust – convenience that you can make an order on a smart phone from the comfort of your home on in a traffic jam, and trust that not only the seller is assured of the item will be paid for, but the buyer taking it for granted that s/he does not need to touch or try the item before buying it.
It needs no repeating that this has been made possible by the ubiquity of mobile phone, especially with the increasing number of smart phones and development of specialized buying apps, but also the central place of mobile money platforms in day-to-day transactions.
It would be a hindrance that the vast majority of residences are not numbered, which would make it difficult to trace a location and deliver a package; except this, too, has been overcome by the phone – the calling for directions where to deliver a package and, upon delivery, payment for the item.
Online stores are also cheap. Not relying on a street-level shop and doing away with the middleman means lower overheads, and therefore room to knock off larger percentages in discounts that has been enticing customers.
It is, therefore, true that e-commerce has been chipping away at the base of the brick-and-mortar model.
It is also true that online and street-level enterprises are finding ways to complement one another. There are such arrangements already working between supermarket chains and online enterprises in the region (i.e., Jumia or Chandarana, among others).
Before the fault-lines bedeviling it came out more in the open, Nakumatt had similar plans reported in the media towards the end of last year. Loyal shoppers such as myself expect the plans should still be in the pipeline.
McKinsey’s Global Institute predicts that by 2025 Africans could be buying seventy-five billion dollars worth of goods and services online annually. It would be foolhardy for any retail business not to take notice and want a piece of the pie.
The key is leveraging the enormous customer data such large supermarket chains have and employing data analytics to better understand the consumer.
This includes taking into consideration commercial-trading cultures in much of Africa that are informal in open markets and roadside stalls.
As Mckinsey also observes, risk aversion, weak customer focus, and siloed mind-sets have long bedeviled organizations. In a digital world, solving these cultural problems is no longer optional.
Faltering and misjudging the outcomes of a business decision has been part of the supermarket landscape worldwide. It is common fare even with the much larger chains such as Britain’s Tesco or Walmart in the US to open and close stores where the market does not yield.
It is also about perseverance, of which I may not conclude without remarking on the fortunes of the British online enterprise, Ocado.
When it started in 2000 to cash in on changing shopping habits as more customers chose to drop the weekly supermarket shop in favour of buying groceries online, it took it 15 years to break even in a symbiotic relationship with the British supermarket chain, Waitrose.
It may be a cliché, but success rarely comes overnight.