South African retail giant Shoprite has opened yet another store in Uganda, a couple of years after it seemed it was downsizing operations in the country. The retailer is increasing competition in the Ugandan grocery market and should concern both domestic and international chains and independents.

Shoprite Uganda has announced the opening of a new store in Kampala, in December 2018. The new outlet will open at the Bugolobi Village Mall, in the city centre. The new store continues Shoprite’s expansion in Uganda and is the third new outlet for the retailer in 2018, after it opened the stores in Victoria Mall, Entebbe and Acacia Mall, Kampala, earlier in the year.

Change in strategy

Shoprite’s current expansion in Uganda was not in the making just six months ago. After entering the market in 2000 and opening three stores, the retailer decided to scale-down its operation and maintain only two outlets in Kampala, in Ben Kiwanuka street and Lugogo. However, the strategy was reverted following the exit of Kenyan retailers Nakumatt and Uchumi. Both played a considerable role in modern grocery trade in Uganda and had entered the country forcefully, including, in 2015, Nakumatt taking one of Shoprite’s stores. According to the Trendtype Retail Database Tracker, Nakumatt alone had ten stores in the country, between Kampala, Entebbe and Mbarara.

Nakumatt’s demise – as well as that of other Kenyan retailers – has motivated Shoprite to again bet on East Africa, especially Kenya and Uganda, where it had failed to succeed before. Like in Kenya, Shoprite is grabbing some of the outlets left vacant by Nakumatt, including the new Bugolobi outlet.

Increased competition

The new store is set to tighten competition in the Ugandan grocery retail market as the main players in the market are shifting. Both existing and prospective chains and independents in the country, particularly in major cities, will expect to be hurt by Shoprite’s expansion. According to Trendtype data, Shoprite’s stores in Uganda have more than 200% selling floorspace than the average of the remaining leading supermarket chains in the Kamapala alone. This means that any Shoprite store is able to carry a significantly larger amount of SKU’s. Scale naturally also brings greater supply chain and distribution efficiencies which will reflect on price. Consumers are likely to respond and other retailers will feel the competition, especially in areas close to Shoprite outlets. These are, not surprisingly, where other main retailers also operate.

With the opening of the new store in Bugolobi Village Mall, for example, Shoprite will expect to attract consumers that shop in the existing chains in the area.

Some of the leading players in Uganda, particularly in Kampala, currently have stores in the immediate area. Game, Capital Shoppers and Tuskys all operate in the same price spectrum, targeting the same consumers. The Game store in Lugogo, Tuskys Kitintale and the Capital Shoppers outlet in New Port Bell Road are all located less than ten minutes from the new Shoprite store. Additionally, Shoprite has another outlet next to Game Lugogo.

Besides tackling the grocery market in Uganda, the new stores will also arguably support a stronger supply chain for Shoprite across the region and put it in a better place to compete on price in both Kenya and Uganda. This is an important factor for Shoprite as It competes with other retail giants, particularly Carrefour, that have made a strong play in Kenya since its dominating domestic players got into trouble.