The sudden downfall of Nakumatt chain of supermarkets is shocking and sad. Just 3 years ago, Nakumatt's managing director Atul shah, unveiled a robust plan that would have seen the company reach $1 billion (Kshs 100 billion) in earnings by this year(2018).
In this strategic plan, Nakumatt intended to open 14 new branches in two years. The year 2015 was supposed to mark the start of a regional takeover. At that time the supermarket chain had a branch network of 52 outlets across Kenya, Uganda, Rwanda and Tanzania. It was the largest retail outlet in Eastern Africa and was looking further.
As of December 2015, Nakumatt had a gross annual revenue of more than U.S $ 500 million and had employed close to 6,000 people in its network of supermarkets. Atul Shah had an ambitious plan of expanding to other African countries by the end of 2017.
So what happened in a span of two years that left the largest retail chain in East Africa fighting for survival? We are in January 2018 and Nakumatt has closed nearly all its branches and the few that remain in Nairobi are nothing but stores of empty shelves and bored staff.
In a recent interview with the Reuters news agency, Atul Shah blamed Nakumatt's dwindling fortunes on a plan to pump money into an extension plan mooted in 2010. According to him, back then, they believed that Kenya's economy would grow at a sustained rate of 10% per year. It didn't happen.
Andrew Dixon who quit as Nakumatt's Chief Marketing Officer in October 2017 has a different view. Speaking to Reuters in November, 2017 he said that the terrorist attack at Nakumatt's Westgate branch coupled with a fatal fire in one of its stores in downtown Nairobi and the demolition of another store to pave way for road construction, created a "perfect storm" of disasters for Nakumatt.
But Andrew Dixon also gives away another reason why he believes Nakumatt is suffering. He says that the family-run business had serious management issues. He even calls them outdated management practices. The business had outgrown its management capacity.
Nakumatt evidently failed to modernize as fast as it grew. But Atul Shah has denied this on many occasions. The problem is that those who cite Nakumatt's failure to modernize as the reason it went down are actually pointing to the fact that Atul is old and should have put in place a succession plan.
Mr. Atul is quick to remind everyone that over the last ten years when Nakumatt was doing well, the only member of his family in the management team was himself. Nobody talked about modernizing and succession back then.
Theft of stock and cash in Nakumatt stores was rampant if not endemic. About 10-15% of stock was lost to theft. Nakumatt later invested in a modern warehouse management system from Oracle but it was too late. Theft is being cited by most people as one of the major reasons why Nakumatt went South.