South Africa
24 October 2007
South African retailer Mr Price launches in the Kenyan market this morning having clinched a franchise partnership with Deacons Kenya.
The specialty store that deals exclusively in kitchen ware and home accessories enters the local scene at a time when the retail market is moving towards the everything-under-one-roof hyper-markets model.
Major local retail chains such as Nakumatt, Tuskys and Ukwala have expanded aggressively into clothing, furniture and white goods that are among the fastest growing sales market segments.
Sales data for white goods at Nakumatt Supermarkets between February and July this year reflects a general expansion with colour TVs and DVDs leading with growth rates of 89 and 79 per cent respectively.
During the same period, microwave sales figures grew by 47 per cent while those of refrigerators climbed by 18 per cent. These rates are expected to double in the festive months of November and December.
Ms Olive Nduati, the marketing and communications manager at Deacons Kenya, said Mr Price regards supermarkets as direct rivals against whom it will compete on the platform of product quality and customer service.
“We are selling lifestyle and will therefore focus on lifestyle driven individuals. It’s not just about price but the entire shopping experience,” she said.
Mr Price’s first store is at Westgate Centre in Westlands and has been set up at a cost of $1 million (Sh67 million). Additional outlets will be opened at the Mall, Westlands, and at the Nakumatt Junction in Nairobi before the close of the year.
Mr Price has its roots in South Africa, where it started its first small retail outlet in Durban in 1987. The group has 829 stores and consists of four retail chains — clothing, footwear, accessories and homeware — organised around two operational divisions, namely apparel and home divisions.
It operates on a high-volume, low-price positioning and has in the past 10 years expanded to other African countries including Namibia and Botswana.
This year, the group launched its new sport operation, Mr Price Sport, and established Mr Price Franchising to drive its African and Middle East expansion plan.
Financial reports indicate that Mr Price’s sales grew by 24 per cent to a record R6-billion (Sh58.2 billion) for the year ending 31 March 2007.
The company opened its first franchise store in Lusaka, Zambia and a second in Maputo, Mozambique in May.
“We see franchise stores as a further growth opportunity for the group. Our franchise model is a low-cost, low-risk one in which goods and fixtures are paid for upfront or bank guaranteed,” says CEO Alastair McArthur on the company’s website.
It remains to be seen whether Mr Price will succeed in Kenya, a market that has proved to be a burying ground for South African companies in the past.
Its entry into Kenya comes only two months after Nando’s fast foods exited in August after seven years in the market hot on the heels of high street clothes retailer Stuttafords which closed shop in March less than two years after it launched its first Kenyan branch.
But Deacons Kenya seems to have bucked the trend with its South African franchise clothing stores. The company has three South African brands under its umbrella – Woolworths, Truworths, and iDentity as well as 4u2, a local brand it owns.
Even as it takes on the Mr Price franchise, Deacons has itself been on an expansion gear that has seen it increase its retail outlets from eight to 13. Three more outlets are due before the end of the year.
Besides Kenya, Deacons has three stores in Tanzania run by Tanzania Fashion Stores, a fully owned subsidiary.
The expansion strategy has been financed partly out of Sh161 million raised in last year’s private placement that brought on board institutional investors including Aureos, the venture capital fund and Old Mutual Asset Managers.
Source :
www.bdafrica.com
