April 9, 2019 / 1:19 PM / 15 days ago

Carrefour Kenya targets number 2 retail ranking this year, franchisee says

* Chain’s growth has been more rapid than projected

* Relying on high volume, low costs to boost sales

* Currently Kenya’s third biggest retailer

By Duncan Miriri

NAIROBI, April 9 (Reuters) - Carrefour aims to become Kenya’s number two retailer this year, adding floorspace and using ultra-competitive pricing to boost sales and increase market share, its franchisee holder in the country said.

Majid al Futtaim’s (MAF) Kenya head Franck Moreau said that, since launching there three years ago, the franchise of the French hypermarket chain had grown far faster than expected, attracting a strong client base among the country’s expanding middle class.

It has seven outlets in the capital Nairobi, with two more planned this year. Currently ranked third with a 22 percent market share, its revenue jumped 71 percent last year to 14 billion shillings ($140 million).

“We should certainly be number two by the end of 2019,” Moreau told Reuters in an interview, adding that MAF also planned to expand Carrefour into Uganda.

MAF, a United Arab Emirates-based mall developer that holds Carrefour franchise rights in 37 countries, opened its first store in Kenya in 2016, securing rapid growth in a country where just 30 percent of retail transactions take place on the formal market.

It offers shoppers refunds if they can find cheaper equivalent items in stores run by Tuskys and Naivas, local competitors respectively first and second in the retail rankings.

“Our business is based on volumes rather than percentages,” Moreau added.

Most of Carrefour Kenya’s stores are located in shopping malls, in outlets vacated by two struggling retailers, Nakumatt and Uchumi.

Shoppers have been flocking there in increasing numbers to buy imported items including cheese, wine and flat screen TVs.

“The potential of the Kenyan market ...is huge because you have ...a booming economy, you have a growing middle class,” Moreau said.

“You have people with the internet and social media who want more and more.”

Competition is also heating up, with South Africa’s Shoprite and Game Stores and Botswana’s Choppies among other retailers that have opened outlets in Kenya in recent years.

Carrefour Kenya has meanwhile partnered with Jumia, an African e-commerce company of German start-up investor Rocket Internet, to offer online shopping, becoming the first major Kenyan chain to do so.

“Digital business online is not the future, it is the present,” Moreau said.

Under the next phase, the partnership aims to guarantee fresh food deliveries to customers within two hours.

The main challenges facing the business include low margins, set-up costs and the absence of a central warehouse, Moreau said, declining to disclose the business’ profit margin.

$1 = 100.7000 Kenyan shillings Reporting by Duncan Miriri; editing by John Stonestreet

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