New supermarkets pose stiff challenge to local businesses

Upon entering Nakumatt or Simba supermarkets located in the city center, one’s nose catches a smooth aroma as the eyes get fixated on the expanse of space, bright lighting illuminating the neat rows of commodities on impeccably organized on shelves. But this was different before August this year. “We bought off City supermarket and we have restructured the place,” recounted Joseph Ndungu Nakumatt’s country manager. Nakumatt’s arrival in Rwanda has enhanced its multinational business status. Initially it was only in Kenya. Hot on the heels of Simba supermarket opening, within 3 weeks Nakumatt also opened its doors. With huge stocks of various products previously not available in Rwanda, the two supermarkets have been the talk of shoppers. And just five months into the country their presence has been felt by local competitors. Some of the supermarkets that were already operating are continuously receiving customer complaints of their commodity prices being higher compared to those of the new arrivals. “I haven’t visited but customers say that our prices are high. But for us there is Value Added Tax [VAT],” defends Muhire Florent the manager of the local Ndoli’s joint Super market in Gisementi in Remera a suburb of Kigali city. Ndoli’s joint super market is the biggest supermarket in Remera and Kimironko. Despite not being located in the city it is strategically positioned to attract customers moving to and from the city. Regardless of people complaining about its high prices, it has a sizeable stock. Muhire also revealed that they purchase their stock from the city center. Ndungu answering to whether VAT was inclusive, “yes of course it is included in the commodity prices.” But further explained that the advantage they had over other local super markets was in purchasing commodities from outside the country on wholesale prices. He explained that the varying commodity prices in the country are due to many middlemen purchasing the same commodities. “There are so many middlemen in the country so that by the time the commodities get to the last retailer, it is at a very high price,” explained Ndungu. He explained that the price burden is then laid onto the customer. Ndungu explained that their major strength over other supermarkets is that, “it is because we are operating 24hours. We never close.” He explained that Nakumatt which has 20 outlets in Kenya and became a multinational supermarket entering Rwanda with a huge capital base. With this huge capital base, Ndungu said that they have an advantage over the smaller businesses. He explained that they buy in bulk from manufacturers and are allowed huge discounts unlike other businesses of lesser capital that purchase in smaller quantities. “If I am buying from the source, I get high discounts. I can get the same discounts like the person who is buying lesser commodities. You don’t expect them to compete with multinationals,” said Ndungu. While Simba supermarket’s marketing manager Justine Ngaramba explained that when restocking their shelves they purchase from abroad. She fended of speculation that they lower commodity prices to fend off competitors. Ngarambe disclosed that their strategy is to make a little profit on more commodities. “Our profit margin is small. We get profits on many items. It also depends on how we get our things [commodities]. We get our things from abroad. But at the end of the day it’s about competition.” However, Ndungu said that in a short period of time since its arrival, Nakumatt was one of the biggest tax payers in Kenya which has already caught the attention of customers beyond the suburbs of Kigali city. “A muzungu called me from Gisenyi. He used to buy in bulk from Kenya to last him four months. But now he comes and buys from us. But numerous people are buying from us from upcountry,” he said. Since its arrival Nakumatt has employed 85 Rwandans.Harshad Sharma an Indian, with a smaller supermarket revealed that the new arrivals have led to a noticeable decrease in profits and customers complain about the prices of commodities. “The profits have decreased. They [customers] tell me that the prices are too high. I decrease because my aim is to maintain my customer relationship.” Sharma however embraces the competition brought by the giant supermarkets. “All businesses are changing and this is the time for competition. There is no problem. It is development in Rwanda.” Ndungu revealed that in the long run there are plans to increase the number of Nakumatt outlets in the country.“We are planning to open another outlet in the city.” He said that Nakumatt’s target was to become a Pan African retail supermarket. And he disclosed thatnext year they are going to expand to Uganda and Tanzania. With plans to expand further, other petty super markets like one owned by Ibrahim Kihuranye in Giporoso Remera are struggling to keep up with business pace. Kihuranye explained that due to middle men they can’t sell at cheaper prices like the huge super markets. “The prices are rising because people are setting their own prices. In town prices vary from shop to shop because they buy from immediate neighbors instead of going to the source,” he said. With local supermarkets already attributing their decreasing proceeds and depleting customer base to the well established new entrants, they have no choice but to devise a solution to their diminishing fame amongst the market shares they recently commanded. barigyetony@yahoo.com