Retail Chains: A Tale of Fallen Giants

 

 

 

Images: Courtesy

Tuskys Supermarket is grudgingly but surely joining the list of fallen giants in the Kenyan retail space.

Like a Siamese twin, it is quickly following in the steps of the fallen giant, Nakumatt!

The script is familiar!

It all starts with empty shelves, delayed salaries for workers, complaints from suppliers over unpaid debts, and soon we hear of a bailout deal in the offing which never materializes.

But Tuskys is not the first supermarket chain to go down this road of insolvency. Previously Ukwala and Nakummat have faced the same fate.

Even foreign entrants like Choppies from Botswana who bought into the unsuccessful Ukwala have been unable to keep their head above the water.

So what is the problem? Is it the Kenyan business environment or is it a question of mismanagement?

First and foremost, most of the now insolvent supermarket chains were family businesses that were set up and run as dynasties.

Which is a good idea because a man should have a legacy to leave to his children and small and indigenous businesses like these are what build a great economy.  Tata Group (India), Wlamart (United States) and Samsung Group (Korea) are some of the great family-run businesses in the world.

However, the management style of these kinds of businesses can be marred with family feuds and infighting especially when the founder passes on.

This has largely been the fate of Tuskys for a long time as the siblings fought over the management of the Supermarket chain after the death of their father.

At one point two of the siblings were charged with stealing a colossal amount of Sh1.6 billion from Tuskys.

These are normally the signs that the business is headed the wrong direction.

The Story of Naivas Supermarket one of Kenya’s biggest retail chains is not any different.

After the death of its founder, Peter Mukuha Kago in 2010 who owned 20 per cent stake of the business, wrangles began over who would take over his shares. 

The story of the big Elephant, now defunct Nakumatt does not read any different. It's a story of mismanagement, uncontrolled debt and purported money laundering.

However, the bigger concern should be the impact that these giants have on the economy.

A report in the Business Daily indicates that Tuskys for instance owes suppliers Sh6.2 billion and is under the radar of the Competition Authority of Kenya. 

The supermarket chain which has over 6,000 employees, recently also found itself in a legal dispute over pay cuts that it implemented between April and June 2020 citing low profitability due to the Coronavirus pandemic.

These figures paint a grim picture of a depressed economy, loss of jobs and financial insecurity!

At the time of its liquidation, Nakumatt is reported to have owed suppliers, creditors and employees over Sh30 billion! 

In as much as most of these retail chains are family businesses, there should be some element of scrutiny exerted upon them by government authorities to ensure job security for employees and financial security for suppliers, creditors and shareholders.

This trend of mismanagement though, is not unique to privately owned retailers only. Uchumi, one of Kenya’s flagship retailers has been on its deathbed for over a decade now.

Many efforts have been made by government to try and revive it with changes of management and cash injections that have not made a difference in the chain.

I guess the brand confidence once damaged is very hard to revive. It’s said that it takes ages to build a brand but just a few wrong moves and the damage is done!

The brand power is an intangible yet evocative tool. It inspires confidence and trust in its customers.

I remember Nakumatt’s brand promise used to read like, “You need it, We’ve got it.”

That alone inspired consumers and empowered them to walk into any Nakummat shop because they were guaranteed of getting whatever they needed!

But once the shelves begin to become empty, the brand promise loses meaning and away flies the business.

The value of the business is based on a promise to its customers; that once that promise is continuously and consistently kept, the business can weather every storm.

We need businesses to thrive so that the symbiotic relationship between all parties (retailers, suppliers, employees, creditors, shareholders) is well oiled and the economy can run flawlessly. 

Whenever any party in the cycle begins to suffer especially financially, you can be sure that the retailer is headed for the rocks!

The other side of this coin is that where retailers are found to be engaged in fraudulent activities that leave suppliers with debts and employees jobless, they should be prosecuted for financial crime and injurious activities to the economy!

This is especially because the gap filled by a giant like Tusksys for the last 40 years would take long to fill and has a direct impact in depressing the economy.

No one knows the fate of the over 5,000 employees of Nakumatt who lost their jobs after it collapsed.

I would sure hate to see Tuskys go down the same road.

Even as they celebrated Joram Kamau Day in remembrance of the founder, I hope that the siblings can get down do business and focus on the strategy of the business with respect to its stakeholders including employees. 

  

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