Is Zim retail sector booming?

HARARE - Zimbabwe's retail sector has embarked on a growth trajectory that could see the industry become a major hub for growing businesses, despite the declining economic situation in the country.

Although retailers have existed in Zimbabwe for a long time, the introduction of global brands and outlets has really kick-started the sector forcing local retailers to expand their boundaries to compete with their larger international competitors.

David Lake, OK Zimbabwe chairman, said his company was planning to open four new stores this year and refurbish existing ones as part of strategies to enhance brand strength and improve sales growth.

“The group will embark on full scope refurbishment of OK First Street and OK Marondera,” he said adding that partial refurbishments would also be carried out at OK Gwanda and OK Mbare.

“A new OKmart will be opened in Mutare soon while a new OK store is under construction and will be opened in Zvishavane by September 2015. Another OKmart is planned for Victoria Falls later in the year. A new and larger store will be put up at Houghton Park,” said Lake.

The latest development comes at a time when Zimbabwe is experiencing an economic slowdown as evidenced by increased company closures and higher unemployment.

These negative trends led to depressed consumer demand and a difficult trading year was experienced by most business sectors. In the full year to March, OK Zimbabwe’s revenue decreased by 4,3 percent to $462,7 million from the $483,7 million posted in prior year, while profit after tax decreased by 22,2 percent to $7,5 million from $9,7 million in 2014.

However, the coming in of Botswana headquartered retail group Choppies, which plans to open at least 50 supermarkets in Zimbabwe in the medium term, has forced local retailers to embark on aggressive campaigns to boost sales — as the battle for customers intensifies.

Lake said in response to changes in market dynamics, OK Zimbabwe has embarked on various initiatives to provide a clearer segmentation of its offerings.

“The measures are being actively implemented to ensure the continued efficiency and profitability of operations and to strengthen the group’s position as market leader,” he said.

Zimbabwe is largely a cash economy and the retail sector still manages accounts for the bulk of the cash transactions. Market experts say at least $1,5 billion turnover is churned by the big local retailers in a year.

The low margins on many grocery items has meant that retail players are hard pressed to generate a high volume of sales to make sufficient profits.

As such, local retailers are increasingly employing their private label products to compete with more expensive branded products or imported goods.

Such a strategy has allowed retailers to expand their networks, with more store openings in various locations across the country to match consumers’ needs and expectations.

John Moxon, Meikles chairman, said the group’s retail department was growing significantly with its supermarket division increasing its footprint by 11,29 percent year-on-year in the 12 months to March 2015.

“In addition, three major stores are expected to be open during the 2016 financial year, and an additional $6,5 million has been budgeted for refurbishments across the branch network,” he said.

Meikles supermarkets — trading as TM and Pick ‘n Pay — recorded a $360 million turnover in the period under review up from $334 million in 2014 while gross profit surged by 8,5 percent to $64 million from $59 million last year.

Moxon noted that Meikles Mega Market was also actively exploring additional sites in high-density areas in and around Harare.

“The locations will use a low-overhead model characterised by modest rentals, limited but high volume offering and a minimal staff complement. This will enable Meikles Mega Market to supply key value items product directly to the large numbers of underserved customers in these areas of the country,” he said.

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