Strathmore UniversityFaculty of Information Technology

Bachelor of Business Information Technology

UCHUMI SUPERMARKET SWOT analysis and Marketing Mix

28th February 2011

Betsy Muriithi051024

[Principles of Marketing Assignment One]

INTRODUCTION

Uchumi is a public limited company incorporated in 1975. Its main objective is to have an enterprise for equitable distribution of essential commodities, affordable prices whilst creating an outlet for local manufacturers.

Some of Uchumi’s founding shareholders are:

Industrial Commercial and Development Corporation

Kenya Wine Agencies Limited

Kenya National Trading Corporation

MILESTONES:

In 1976, the first branches were opened.

Uchumi became a trendsetter in low pricing to the advantage of all customers while at the same time maintaining a high standard in quality of goods and services.

In 1990’s Uchumi spearheaded the hyper markets concept in Kenya.

Uchumi places emphasis on the value of continuous training and concern with staff customer relation which has been the key ingredient of Uchumi’s runway success.

DOWNFALL:

In the year 2000, Uchumi started to experience financial and operational difficulties occasioned by a sub optimal expansion strategy coupled with weak internal control system. Therefore as a result on 31st may 2006, the board of directors resolved that the company ceases operations and on 2nd June in the same year, the debentures holders placed the company under receivership and the capital market authority suspended the company listings on the Nairobi Stock Exchange.

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Following an agreement between the government of Kenya and debenture holders, the company was revived and commenced operation from 15th July under specialized receiver manager and interim manager. Uchumi announced that it was out of receivership this year on 1st February.

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SWOT ANALYSIS

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Strengths

Online shopping cart that enables customers to shop via the internet and with the growth of ICT would prove highly beneficial.

Good customer service through their The Uchumi U Club loyalty scheme that aids them by creating an avenue to help them understand their customers more and their preferences.

They are a local retail brand therefore most customers being Kenyan are ready to support it.

Established name brand that is identified with reasonable to cheap pricing and bargain pricing.

The organization deals in all types of goods from clothes to electrical items, from jewellery to garden equipment and therefore caters to a wide range of individuals and needs.

Suppliers attest that their professionalism is unique. Thus they have a high reputation

Customers can redeem their points which they earn from using their Uchumi cards any time they want but not at designated periods.

They have an unrivalled focus on customer service.

Weaknesses

The slump they underwent prior to 2006, they were overtaken by Nakumatt and Tuskys and thus they rank third in number of outlets and sales volumes.

The near collapse two years ago caused by, among other things, an expansion programme financed by short-term capital may have put potential investors at bay.

They do not offer a wide range of products as compared to their close competitor Nakumatt.

They have avoided market segmentation which could prove useful when it comes to differentiating prices.

Therefore from above:

• They have partnered with mobile operator Yu to provide a service which allows customers of the retail chain to pay for goods at the till through yu-Cash. The partnership allows Uchumi Supermarkets to carry out yu-Cash registrations and cash-in-cash-out transactions in all their outlets. The only retailer that does this.

• Uchumi is set to issue 86 million more ordinary shares, as they prepare to re-list at the Nairobi Stock Exchange.

• They have on-going projects: locally in; Nakuru, Taj Mall in Embakasi, Nyali in Mombasa, Kiambu Road. Regionally they are about to open in; Dar-Es-Salaam, Kampala (a second hyper) and Gulu also in Uganda.

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Opportunities

The market for modern trade (supermarkets) is increasing. With so much potential sites for new branches in different parts of the country and regionally in East Africa and Southern Sudan, the graph can only curve upwards

They have on-going projects locally and also regionally (in Kampala and Tanzania) thus increasing their market share.

There is also the promising growth of the economy, estimated at 6% this financial year which will mean growth in employment and thus more disposable income.

They could also offer 24hr services to increase sales revenue

Threats

Competition from competitors like Nakumatt that have a higher market share and Tuskys.

Competition from other smaller shops.

Mismanagement which once led to their shortfall.

1 MARKETING MIX

1.1 PRODUCT

The product in this case is in terms of Uchumi branches. Meru branch is the most successful branch and marketing has played a big role through;

Road shows – they carry out joint road shows with their suppliers e.g. KBL, UNILVER, COCA COLA, where they traverse the Meru town and county connecting with the ‘mwananchi’. This has really put excitement and trust towards Uchumi Supermarkets to the extent they now control over 60% of supermarket business in the town.

Use of the popular local media like The Meru Eye, Wembe Newspapers and MUUGA FM. These have a wide audience and coverage thus very effective channels of communicating their messages (price offers and services/products offered) and brand building.

Pricing – they aim to be the fairest and to remain most competitive.

Bill boards/Street banners – This directional signage help locate their shops and thus increase footfall (customer numbers).

Their shops are classified into three categories to suit their consumers;

Hypers – over 30.000 sq.ft.

Supermarkets – medium size

Convenient shops – mainly in the residential estates.

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1.2 PRICE

They carry out regular market/price intelligence surveys to ensure they are abreast of the market dynamics in pricing. Suppliers are critical in pricing because some have recommended retail prices (RRP). Pricing is also guided by our gross margins benchmarks to ensure they are making profits. They also have adapted promotional pricing especially during major holidays where they offer regular promotions.

Uchumi maintains to be the fairest in terms of pricing their products thus their slogan ‘The Home of Value’.

1.3 PLACE

Viability of a location is heavily influenced by;

• Population of the location. The existence of middle class is key as they constitute a population with disposable income to spend.

• Accessibility such as infrastructure (roads and electricity). In towns, they are now locating shops in residential estates with the aim of making it convenient to customers who then travel shorter distances.

• Security is important. Therefore, areas like Kayole and Dandora are not attractive though they have the population.

They have avoided segmentation. The stock keeping and variety is guided by customers’ demands (buying habits/sales trends) as opposed to profiling customers. For instance, Ngong Hyper will cater to the affluent of Ngong Road and the slum dwellers of Kibera.

1.4 PROMOTION

They are satisfied with the results of advertising as it has led to a strong brand, goodwill from customers (seen in the increasing customer numbers) and sales growth.

They utilize;

radios (local vernacular FMs)

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online presence(websites/portals)

street banners

TV is very effective in projecting major retail promotions like Christmas bonanzas

Business and social magazines like True Love, KIMs Management, Business Mirror, Parents etc.

Newspapers. The dailies are effective on special product offers where they announce discounts and price cuts.

Their own shop floors - (space selling, LCDs, in-house radio, point of sale-till branding etc.)

They mainly use the same media as their competitors. They believe that their competitors are doing well. However, they avoid copying or ‘following’ competition.The price offers they place in The STANDARD & DAILY NATION mid and end month are aimed at reminding shoppers Uchumi (Their Home of Value) has deals always!

Their calendar is guided by events and occasions that influence retail business like ‘back-to-school’ when schools are opening, IDD-UR-FITR, Valentine’s Day, Mother’s Day, Easter (situations that call for catering to exigencies of the time) and the festive period (November to end December) which is the busiest in the annual retail calendar and they carry out heavy advertising campaigns in form of Christmas promotions and season offers.

They also reach target consumers by:

• Road shows. Helps connect with the ‘ground’ where they directly meet their customers.

• Magazines like Insyder and popular radio shoes are strategies targeted at the youth to capture their attention

• Activities in the stores. Every day they get thousands of shoppers coming into their shops and thus their outlets are equivalent to a walking billboard (they allow direct contact with buyers).

• In-built corporate social responsibility (CSR) element. Resonates well with customers that they make it their policy to treat the less fortunate members of the society as key stakeholders in their business.

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• Involving suppliers (other key brands). The synergy creates interest and networking leading to higher success.

• Rewarding such that there is a motivation to participate say in raffles. The key tenet of reward based promotions is to ensure you keep the promise. Kenyans have come to know Uchumi keeps its promise, winners have never been disappointed and the draws are always conducted in the manner authorized by Betting Control and Licensing Board (BCLB).

• Loyalty Schemes. The Uchumi U Club loyalty scheme is aimed at creating an avenue to help them understand their customers more, respond to their customers’ salient needs and cater for their customers’ tastes. The customer relationship management is its best attribute as it provides or captures trends and provides information that helps serve customers better in terms of product assortment and timing trends. They have a pool of about 300,000 customers who they use to gauge their service levels, and also seek ways and opinions to improve business.

• The fact people earn points every time they shop (a point – a shilling for every Kshs. 100/= spent), using the Uchumi card makes them stick with Uchumi so as to grow the points. Their best strategy, unlike competition, is that customers can redeem their points any time they want but not at designated periods. This has created a pool of loyal shoppers.

2 REFERENCES

MWANIKI WAHOME (2011). Uchumi chain to issue 86m extra shares. Daily Nation,

http://www.nation.co.ke/business/news/Uchumi+chain+to+issue+86m+extra+shares/

Uchumi Takes Up Yu-Cash, http://www.capitalfm.co.ke/business/Kenyabusiness/Uchumi-takes-up-yuCash/

MWANIKI WAHOME (2011). Uchumi to Open More Branches in the Region. Daily Nation, http://www.nation.co.ke/business/news/Uchumi to open more branches in the region/

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