Swedish direct sales company Oriflame has said it plans to quit Kenya after trading conditions worsen. The cosmetics retailer blames the complexity of the importation process and lack of volume sales growth.
Oriflame will exit quickly: it has asked its multilevel sales clients to make financial claims related to hte sale of their products before 31st January 2020. It will wrap up all its operations the month following.
Kenya was a flagship country for the company, which entered the market in 2008 through a franchisee, but in 2012 the company acquired the local operations. After Kenya it entered Uganda, Tanzania and Rwanda.
Individuals could become Oriflame sales agents by paying Sh450 ($4.60) after which they received training and promotional materials. This allowed them to buy products for resale at a 30% discount. Sales agents would also receive commission from sales made by agents they had recruited into the Oriflame network.
“In Kenya, given the process of importation of goods becoming long and cumbersome and lack of sales volume growth is making the continuation of the business economically unviable,” the company has said.
Certainly, since 2008, the dynamics of the retail landscape has changed radically. Oriflame products, for example, can be found on internet retailer Jumia’s site. Although formal retail has had some problems with the collapse of Nakumatt and Uchumi, it is buoyant once more and cosmetics brands are also benefitting from a maturing pharmacy sector too, which is also attracting outside investment.
The real threat, however, has come from Copia, the high growth ecommerce platform that boasts more than 5,000 points of sale in Kenya and which has now raised $46m in funding. Aimed at the lower end of consumer spectrum, Copia sells personal care products among the wide range of goods it offers. It also doesn’t suffer from some of the trust issues that affect multilevel sales schemes such as Oriflame’s, which have been subject to fraud scandals (not Oriflame’s specifically).
Oriflame, by contrast, offered more premium products and its high margin sales model limited the affordability of its products (and therefore limited the viability of its sales model outside Nairobi).
