From just one shop that sold mattresses in Nakuru, the Nakumatt chain of supermarkets grew to its current mega-presence of 32 stores spread across Kenya, Uganda and Rwanda, with six more planned across the region before the end of the year. Along the way, a tragic fire in one store and the demolition of another are just some of the setbacks the chain has overcome to stay on top of the market. Nakumatt’s Chief Executive Oicer ATUL SHAH (HAKU) spoke to DEA’s KWENDO OPANGA on the surefooted spring to success in which everyone is one large family
DIPLOMAT EAST AFRICA: How old is Nakumatt and how would you describe the story ofthe supermarket so far?
ATUL SHAH: Nakumatt was born out of Nakuru Mattresses. Nakumatt is short for Nakuru Mattresses. Nakuru Mattresses was registered in 1965. We took over the business in 1978 and we were only in Nakuru and Eldoret until 1987 when we set up a small store in Nairobi on Ukwala Street. Then it was known as Nakuru Mattresses, Nairobi. In 1991 we had our first branch.
This was the first so-called hypermarket or supermarket. It was small; only 4,500 square feet. This is what is Nakumatt Mega today and which is approximately 125,000 square feet. So, just like babies grow so has this store.
At the moment we have 28 stores in Kenya, three in Uganda and one in Rwanda. This year, we plans to put up one more in Rwanda, one in Uganda and at least four more in Kenya. So, six stores are planned to be operational this year.
Q: You haven’t mentioned Tanzania.
A: We will open our first store in Tanzania in June in Moshi. Why Moshi? Because development in Dar-es-Salaam was stopped, so if it gets underway again then we will have a branch in Dar next year. We will also have a branch in Arusha where we have already identified a site. Bujumbura is the next stop, then Juba.
Q: That’s rapid expansion.
A: No, that’s opportunity. Yes, we have gone through financial issues because of expanding too fast, but the cost of opportunity was higher. We had some financial issues but we have now recovered. The banks have supported us; one of the banks thought we were expanding too fast, but they did not reckon with the opportunity value. All the banks have realised the opportunity value that we espouse.
When a location is available, you don’t begin asking questions about when because the location is there and then. If you look at Nairobi, we have three circles; the CBD, then the middle circle where we have Nakumatt Mega, Nakumatt Junction and Westgate and the outer circle in which you find us in Embakasi, Galleria, Karen and Village Market. Kiambu Road is coming this year, and the new Thika, which is due next year. The three circles cover Nairobi very well; take any road out of Nairobi and you will find us.
Q: What would you attribute the success of Nakumatt to?
A: We are successful because Nakumatt is one big family. We have 4,700 people working with us in Kenya. We are all concerned about how Nakumatt can be even bigger and better. Everybody here, apart from a few professionals, has grown from, say, a shop attendant to become a manager, or a driver to become a manager, or a turn-boy to become a supervisor. Nakumatt is therefore something everybody is attached to; everybody looks at it as their own; to which they belong.
Second, we have always tried to align ourselves to, and adopt the requirements of our shoppers and given them the most attractive and cleanest environment in which to shop, in the right locations and everything that goes with customer requirements and satisfaction. We also appreciate that our customers have been very supportive. Our suppliers have also been very supportive because when we started looking for better-looking stuff and bar codes; when we demanded world class products and standards for goods and packaging; local manufacturers rose to the challenge and continue to give us world class quality.
Q: When you talk of 4,700 employees, that’s the number you employ directly?
A: That’s the number for Kenya. We are 5,000 as an East African family.
Q: How many suppliers could you be talking about?
A: The suppliers we deal with on an in-and-out basis daily will be about 700. Out of these, we have supported about 150 suppliers from being cottage industries to significant manufacturers.
Q: Nakumatt stores are found mainly in shopping malls. That’s deliberate I think, what’s the reason for that?
A: Yes, our stores are in shopping malls. There is a lot to do in shopping malls and many people will be found in such places, but if we were stand-alone businesses perhaps there would be times when we would not have many shoppers. There is a lot to do in shopping malls for anybody and everybody to be there.
Q: Is location everything?
A: Ninety per cent of your work is done if you have the right location. If you stay in Karen, for example, you can shop at Nakumatt Junction, Nakumatt Karen, Nakumatt Prestige, Nakumatt Mega, Nakumatt Galleria; you have a choice depending where you are, going or coming from.
Q: Looking at your investment across East Africa, how much money are you talking about? Are you getting a return on your investments?
A: The returns on setting up a good hypermarket is about eight years; the returns on setting up a supermarket would be about six years; to set up a convenient store, like UKay, would be between three and four years. So it depends on the class of supermarket you go for, but, of course, we are going for a mixture of all three.
Of course, the 24-hour stores have been very successful, because congestion in Nairobi and the pressure of time led us to think about convenient shopping hours. This would have meant staying open up to midnight or 2 o’clock, but then there are issues of unavailability of public transport to take staff at home at that time of the night.
So we opted for 24-hour shopping. Our busiest time is between 9 pm to 1 am. This is the biggest basket value time. Families come to shop at this time. They have time on their hands; there is no pressure on them; there is no work; there is no traffic, there is no congestion. Twenty-four hour shopping has helped bring families together.
Previously we would close our stores at 8.30 pm and there would be many customers at the doors pleading to be allowed in because they were held up in traffic. So we made a deliberate decision to alleviate the suffering of our customers because traffic snarl-ups and congestion are not their fault. We are happy to note that the government is tackling infrastructure to make mobility easy.
Q: Allow me to take you back to investment. What is the value of your investment now?
A: Each hypermarket, which we set up, costs approximately US$2 million; a supermarket costs approximately US$1 million and a convenient store approximately US$500,000.
Q: Looking at your operations in Kenya, Uganda and Rwanda, where do you find it easiest to do business?
A: In Kenya of course we are established; we know the way things work here and we are much more systematic. Uganda is getting much better given the discovery of oil for example, but it will be a long while before it catches up with Kenya. Rwanda has challenges because it is landlocked and not industrialized. Things are a bit slow, but very systematic and government policies, support and systems are very much in tune with the world. As for Tanzania, let us jump into it first then we can decide what it is.
Q: In terms of getting licences or permits to do business in East Africa, which country has made the processes faster?
A: Each country has its own policies. The East African Community talks about free movement of goods or people or free movement of knowledge, but has this gone down to the lower levels, to the people who matter? Things are a little slow getting down there; it is getting there, but it is not there yet. Every country thinks its own way; the individuals who sit behind desks think in their own way although we have the East African Community which thinks differently. The policy is made on that East African Community table, but the implementation happens further down and that takes time.
Q: What message do you want to send out to governments of East Africa?
A: I want to ask governments in East Africa to encourage the import of agricultural knowledge. We are agriculture-based economies. We have idle land; we have free water which goes to Egypt and into the Indian Ocean. We need expertise and knowledge to enable us farm better. Why has Kenya’s agriculture grown over the last six years? Because dairy farmers, for example, are being paid promptly as are coffee farmers, where previously they would be forgotten for years! Second, let us not have bottlenecks for those who want to farm. If there is employment on the farms, who will want to come to the cities?
Q: How much of Nakumatt’s business is agriculture-related?
A: I would say about 18 to 20 per cent. You are talking about cereals, milk, meat, cheese, vegetables. That’s big and that does not include processed foods.
Q: You had the bizarre challenge sometime in the 90s when Nakumatt was accused of stocking goods contaminated with mad cow disease (Bovine Spongiform Encephalopathy). What was that all about?
A: We have gone through many challenges; challenges have never stopped and will never stop. We fought that challenge in the right and correct legal manner. We stood our ground to get justice, to get the attention the matter deserved.
The business community has learned that it has to fight for its rights; protect itself. You can no longer walk in and walk out with a suitcase. We were the first to be confronted with a case like that and we suffered a great deal, but the whole business community has benefitted from our fight for our rights.
Q: You had a branch demolished on Thika Road. Had you been given adequate warning that this was coming?
A: We have heard that warnings were given. We were not landlords; we were tenants. So if the landlord was warned, we are not aware of it. That was not something that happened suddenly, or was thought about the night before. A lot of planning must have gone into it and whether the building was on a road reserve or not, whether I was the landlord or not, that was not the kind of action you expect from a human being.
We are still waiting for somebody to tell us who were responsible for the demolition. Who gave the order? Why did they not come and tell us that we have seven days to vacate? We are still waiting for answers to this day and minute.
Q: Can you quantify your losses from the demolition?
A: Besides losing a branch which was fully stocked, which was demolished with products inside, furniture and fittings, we had a lease which was pending for 11 more years. We have lost opportunities for 11 years; we have lost 11 good years of trading in that area. That was one of the most successful branches, being in the right location.
Q: The fire that burned down Nakumatt Downtown. Can you ever get over something like that?
A: No. If it was just a fire and the shop got burnt and building went down, it would be okay. But when we lost lives; lives of customers, lives of colleagues; that you cannot forget. That will always be on our minds.
We had everything we needed to have and do in case of a fire, but this accident caused us to think further, to look again at our safety requirements and regulations and much more. We now have more signs for fire exits, for example, to avoid a repeat of that tragedy.
Q: How do you ensure you remain ahead of the competition? How do you maintain your leadership position?
A: When you are Number One it is difficult to maintain the position. When you are Number Two you can easily get to, or catch up with, Number One. We are therefore always thinking of new things to do, attractive things to bring into the store, we always think of excitement, and we look for opportunities all the time. We say go for opportunity and look at the cost later.
Q: What is it that you worry about most regarding the business when you wake up in the morning?
A: What new thing can we do today? What something new can I bring to the business today? This is because whatever we have done so far, we have ensured it is working perfectly, so what should be new that will benefit the business and everybody?
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