On May 28, Massmart opened its first Game store in Kenya’s capital Nairobi. This was its 10th store outside South Africa since U.S. chain store giant Walmart bought a controlling stake in the retailer in 2010.
But compared to its South African rival Shoprite, which has doubled the number of stores it has outside its home market to 300, Massmart has only managed to grow its outlets in other African countries to 25 despite a better financial support from its American shareholder.
According to a report on Fin24.com, Massmart rather cautious approach to expanding in Africa highlights its inability to understand the business climate in the region and adopt appropriately.
While several African countries have posted good economic growth in sub-Saharan Africa over the last decade, identifying the true growth markets has proven rather difficult for Walmart, which was expected to be Shoprite’s tough competitor when it came to regional expansion.
“I was very excited when I heard Walmart is bringing low prices to South Africa but I haven’t seen that,” Themba Khumalo, a 31-year old bank teller, told Fin24.com outside a Johannesburg shopping mall.
With operations in 11 sub-Saharan countries including Nigeria, Tanzania and Ghana, Massmart has been pushing further into the rest of the continent that is forecast to be home to 2 billion people by 2050, to offset slowing growth in South Africa.
But the “Africa Rising” narrative has not been good for many retailers across the continent and “Walmart is now facing the reality,” said Boris Planer, analyst at London’s Planet Retail.
The retailer’s attempt to enter new markets through acquisitions has proven costly and time wasting.
In 2013, Massmart’s attempt to acquire a controlling stake in Kenya’s fourth largest supermarket chain Naivas turned sour after member of the family-owned company started wrangling over ownership and the decision to sell shares to the South African investor fell through.
A similar attempt to buy a stake in Botswana’s largest retailer Choppies last year also failed and led to the resignation Massmart chief executive Grant Pattison.
Shoprite has however pushed ahead with its expansion across Africa by going into new markets using a greenfield approach.
“Shoprite started by setting up warehouses and partnering with developers to build shopping centers and that’s why it is in this quick store roll-out phase whereas Massmart is a little bit behind,” Wayne McCurrie, a fund manager at Momentum Wealth in Pretoria, told Fin24.com.
Walmart still insists that it is committed to investing in more African countries.
“We are excited by the retail opportunities in Africa and we’re confident in the ability of Massmart’s leadership to drive future growth,” said Marilee McInnis, director of International Corporate Affairs at Walmart.