Kenya is on the verge of moving from a low-income economy to a fully middle-class consumer economy. The population is mainly young and the middle class is growing.
There has been a growth in the supply of retail space in recent years to reach c. 12.6M sq. ft as of December 2020. New bright and shiny shopping malls are popping up everywhere in the capital city of Nairobi. Shopping malls are not only located around high-end neighborhoods but also in the low middle-income neighborhoods in Eastlands and other cities such as Mombasa, Eldoret, and Nakuru. Convenience stores have been on the rise as well, mainly in petrol stations and within residential courts/blocks.
Due to the Covid-19 effects, the sector recorded subdued performance in 2020 as evidenced by the struggles facing Tuskys and Shoprite.
However, the sector registered positives such as; Carrefour expansion to a new location along Uhuru Highway, Quickmart opening several stores including one in CBD along Tom Mboya street, Naivas opened several stores including Waterfront Mall in Karen, LC Waikiki expansion to Nakuru, Big save opening along Airport North road, KFC opening in Mombasa. Earlier in 2020, the sector also saw the entry of international retailers such as Turkish home furnish retailer Istikbal, Spanish fashion retailer Tendam Group, and Hong Kong fashion chain Giordano among others. These expansions and entry by some retail players have cushioned the performance of the retail sector by taking up prime retail spaces left behind by their troubled counterparts.
e-commerce continues to gain traction with online shopping platforms such as Jumia, Jiji, and Amazon being embraced as it registered a growth rate of 8.6% in internet subscription according to the 2020 Economic Survey by the Kenya National Bureau of Statistics. The popularity of mobile wallets is enabling and making online shopping more convenient.
The growth in modern retail is mainly driven by:
- Growing population: Kenya’s population is growing, especially in urban areas increasing the demand for modern retail options
- Growing income level: Kenya is on the verge of moving from a low-income economy to a fully middle-class consumer economy meaning higher disposable income to spend in modern retail. There is a significant ex-pat population willing to spend in these modern retail outlets
- Consumer tastes and preferences: The growing middle-class consumers are more aware of global brands and retail experiences and therefore more demanding of the local experiences as well
- Position of Kenya as a regional hub: The country is home to many multinational headquarters/regional offices, embassies with a significant population of expatriates looking for international shopping experiences
- Infrastructure development: The number of modern shopping malls and attractive retail space options has gone up in recent years. Continued investment in road and other support infrastructure as opened up areas for retail space investment
- Entry and expansion of both local and international retail brands: local retail chain Naivas, foreign brands such as Carrefour, LC Waikiki has continued to expand to different parts of the country.
All these factors are likely to continue contributing to the growth of the sector. Online shopping is likely to continue growing and more international brands are likely to continue coming to the Kenyan market.