The objective of the study was to collate the needs of members that the association can use to pursue with government and other stakeholders so as improve the business environment for the sector.
Other Objectives include:
Survey period: June – July, 2020
Sample size: 91 Retailers across Kenya who are Members of the Retail Trade Association of Kenya.
Data collection: An online survey was carried out through our social media handles and on our website, targeting retailers of all sizes in Kenya. Responses were collected and findings analyzed and compiled into this report.
The survey respondents are retailers operating Green Groceries, Supermarket / Hypermarkets, Minimarkets, Books / Office Stationaries, Fashion/Apparel/Shoes, Pharmacies / Chemists, Sports & Athletics Stores and Restaurants; who are members of the Retail Trade Association of Kenya (RETRAK).
Key Findings & Implications
Organizations type of stores
The survey respondents are drawn from the retail sector in Kenya operating Green Groceries, Supermarket / Hypermarkets, Mini-markets, Books / Office Stationaries, Fashion/Apparel/Shoes, Pharmacies / Chemists, Sports & Athletics Stores and Restaurants; who are members of the Retail Trade Association of Kenya (RETRAK).
Overall, 37% of the survey respondents are supermarkets and Hypermarkets, 3% Green Groceries shops, 14% Mini-markets, Stationary shops and Fashion and apparels both at 17%, Pharmacies 10% and 7% were Sports / Athletics shops.
No. of branches in operation of the Respondents
The survey respondents included all sizes of retail businesses operating one branch/store or more than one branches. Overall 45.5% operate Less than 5 branches, 24.2% operate 6 – 10 Branches, 15.2% operate 11 – 20 Branches while a similar number 15.2% run more than 20 branches.
Operational Core Business Activities of the Retail Stores
The projected average growth of business units in the next two years in retail sector is 20.78%. The area of cooked food and bakery seems to be of great interest to retailers and the refer will grow fastest in the next two years both recoding 38.46% and 25% respectively. Consumer demand for availability of wide range of products will see the grocery grows by 20%. Mobile and electronics will grow by 21.43% due to increased consumer demand. High consumer demand for home consumption in the new normal due to Covid 19 restrictions on movement and social activities will lead retailers to expand their core business to Wines and spirit 16.67%, fruits and vegetables 15.38%.
Anticipated Change in number of branches in the next 12 months
The future of retail sector is promising with stores expansion projected to be at 32.35%. Majority of the retailers 41.18% will maintain the same number of stores but may compliment their excising stores with an online presence. However, a quarter of the respondents 20.59% will close some stores while another 11.76% are unsure
Retail Businesses (Licenses and Permits) Regulations
In terms of regulation, survey revealed the retail sector is heavily regulated as businesses require 18 different licenses and permits. Some are mandatory like Single business permit and Fire inspection certificate, while others are based on business operations and include: Fish trade license, KEBs certificate, Dairy board inspection, NEMA certificate, Pest Control Product Board, Liquor license, Seed selling certificate, MCSK/KAMP/PRISK. Other Licenses include: PPB, Signage Permit, ERC from sale of LPG, Loading Zone and Sign Board, as well as Cook License.
Overall, 100% of the survey respondents have Single business permits and Fire Inspection certificate (Clearance Certificate), 50% Fish trade license, 84% KEBs certificate, 70% Dairy board inspection, 80% NEMA certificate, 58% Pest Control Product Board, 86% Liquor License, 38% Seed selling certificate and 95% subscribe to MCSK/KAMP/PRISK Licenses.
Retailers opinion on Retail (Licensing and Permits) Regulatory
The retail sector includes many different subsectors, and each of them faces unique regulatory challenges. Overall, there are too many licenses and permits required for the businesses and system of applying and renewing is inefficient and costly. Majority of the retailers 30.30% feel that the many of licenses can be merged. Another 24.24% feel that a single-window online service should be instituted for these licenses. Some of the licenses are not proportionate to the retailers use such as MCSK, KAMP, PRISK. It would be prudent to make them more affordable as indicated by 21.21% of the respondents.
The high number of licenses and permits is a hindrance to growth and innovation of products. A single business permit was meant to have merged many of these. This should be revisited. Institute a single window application and auto renewal of licenses to make the process more cost efficient, timely and convenient when applying and renewing licenses using technology.
The future of Retail Sector in Kenya
Even in the current circumstance of Covid 19, retailers are optimistic of the future as combined majority 47.05% foresee constant growth with a promising potential. Another 44.12% find the growth to have slowed down. This may be due to consumers selective spending due to economic uncertainties. Inspire of this, a significant number of retailers 11.76% are uncertain of the future.
Current Business Challenges facing Retail Stores
The two biggest challenges facing the retail sector according to the survey is Low economic growth 76.47% and Government Regulation 61.76%. This is replaced in slow GDP, inflation and now compounded by Covid-19. Other challenges include customer retention 23.53% due to price sensitivity. 26.47% of retailers are struggling with staff retention and turnover due to an undefined career path in retail.
Top 3 barriers to trade in individual store(s)
Of the top three barriers of trade facing retailers in Kenya, majority 37.5% named Human Resource as the greatest barrier. Corporate governance at 28.13% resulting from weak governance structures especially in family owned businesses. A similar percentage 28.13% is limited by financial capacity.
Current security measures to protect merchandise and inventory
Generally, all retailers surveyed have put in place various forms of security measures (both human and technology) in their businesses with CCTVs being the foremost used security gadgets at 76.47%. Unfortunately, it has been noted that these are not efficiently manned and therefore not a great deterrent to theft. It is recommended that there be a dedicated staff to man the footage throughout. Only 11.76% use in store anti-theft systems. Retailers should perhaps invest more in antitheft systems than CCTVs as they are more effective and instantaneous in alerting on theft. Another 5.88% use fingerprint biometric at the POS systems while an equal number have no form of technology in their stores but rely on human assistance. The use of fingerprint Biometrics should be encouraged to eliminate passwords that can easily be accessed by unauthorized people.
Technology enhancement Top Point of Sale (POS) priorities for the next 24 months
eCommerce integration leads the top three Point of Sale priorities for retailers in 2020 at 53.13% given that the survey was conducted during outbreak of Covid-19 pandemic. This is driven by the consumer demand for online shopping. For greater efficiency in operations to improve customer experience, and inventory controls to reduce stock theft both internal and shoplifting, 46.88% of retailers are looking to upgrade or replace their systems and another 32.25% adding capabilities to existing systems.
Technology enhancement eCommerce Adoption Plan
The Adoption of eCommerce is on the rise given the consumer demand for online sales due to Covid 19 restrictions. Out of 42.4% of retail businesses without an existing eCommerce store, majority of retailers 39.4% are considering a unified approach to their business in-store and online in the next 18 months, with 30.3% of retail businesses currently implementing an eCommerce platform, while 3% plan to implement in next 6 months and another 6.1% in the next 18 months. Notably, more than half 57.58% of the respondents already have an eCommerce platform in place. However, a few 3.03% of the retail businesses do not consider eCommerce a priority for them.
Conclusions & Recommendations
- The high number of licenses and permits is a hindrance to growth and innovation of products. Majority of retailers felt that these licenses should be merged. Also, some licenses are not appropriate to some retailers such as MCSK (Music Copyright Society of Kenya), PRISK, KAMP (Kenya Association of Music Producers). A single window online service should be instituted for these services for greater efficiency and to manage costs. It will be more convenient if the licenses were auto-renewable.
- The area of Cooked Food and Bakery is of great interest to retailers having been accelerated by Covid-19 demand for cooked food, fresh produce and bakery in retail outlet, and it will grow fastest in the next 2 years.
- In spite of the challenges experienced many retailers expressed a positive future with over 30% looking to store expansion, over 40% maintaining the same number of stores but complimenting with online presence. Only less than 12% were unsure about the future.
- Retail Sector in general experience slowed growth as a result of Covid 19 restrictions resulting to consumers selective spending due to economic uncertainties, and fewer operational hours for the retail stores. This saw a growth in the informal sector. We will continue engagements with Ministry of Trade, KRA, and County Governments to work towards a more conducive business environment.
- Retailers struggle with Human resource as the top most barrier of trade as they struggle staff retention and turnover due to an undefined career path in retail sector. Retailers should increase engagement with employees by providing periodic new training programs that can maximize their potential. There exists no retail curriculum in Kenya. The earlier conversations round the Retail curriculum should be actualized.
- The weak corporate governance which was cited as 2nd top barrier of trade has seen retail giants struggle to remain afloat. We look to engaging the Capital Markets Authority and the Institute of Corporate Governance to train on best practices on corporate governance in retail sector.
- eCommerce integration is a leading priority for more than half of retailers surveyed due to increased demand of online shopping as a result of Covid 19 restrictions. We recommend that retailers embrace eCommerce online stores to compliment brick and motor stores.
- Inventory control is key to the success of any retailers. Most retailers surveyed have put place some security measures (both human and technology) in their stores with CCTVS being the most common. We recommend that Retailers should perhaps invest more in antitheft systems than CCTVs as they are more effective and instantaneous in alerting on theft. The use of fingerprint biometric should also be encouraged