The rise Nakummatt holdings Ltd
Established in 1987, Nakummatt Holdings Ltd. Is one of the oldest and biggest retail company to establish its operation in Kenya from a little town in Nandi hills, Rift valley province. The company was incorporated by Atul Shah family as the main proprietor. Within a few years that were epitomized with the increase in more retail stores in Kenya, Nakummatt Holdings Ltd re-branded and re-positioned itself as one the selling and household brand in every household in Kenya.
As a result, the owners expanded its presence in the Kenyan capital city and opened up its headquarters along Mombasa road, Emabaksi. With literary no competition from within, Nakummatt Holdings Ltd was the sole brand in the country and many people liked the brand. Many of the retailers by then could not afford to compete with a huge company that had established operations in the country. For decades, Nakummatt holdings Ltd had been the glory of the Kenyan retail industry employing thousands of local and international employees throughout its outlets in the country.
By 2015, Nakummatt Holdings Ltd was the largest retailer in Kenya with average annual revenue of $ 450 million in excess with approximately over 5,000 employees throughout the country. By 2017, the company was at the helm of its growth, and the country was saturated with its outlets. The management embarked on a growth and expansion strategy that as the company increased its retail space in the country even further.
Expansion and regional subsidiaries
Being limitless financially, Nakummatt holding went global and opened up a series of chain stores in the larger East African countries. The first store outside Kenya was opened up in Kigali, Rwanda, and was named Union Trade Center in 2008. In less than a year, the giant and over surplus company made another broad move to open a new branch in neighboring country Uganda in 2009. With extraordinary financial backing, Nakummatt holdings after setting its foot in Kampala, Uganda, engaged in series of takeovers from local retails.
As result, two of the Payless stores were taken over by Nakummatt bring to three the numbers of stores that the retailer had in the country. In 2016, Nakummatt holdings management yet again announced another expansion strategy that could result in the opening up of five more stores outside Kenya. And by 2017, Nakummatt Holdings Ltd was the leading retail company in Kenya with at least 62 branches within East Africa -45 outlets in Kenya, 9 stores in Uganda, Tanzania had 5 and Rwanda had 3 stores owned by Nakummatt Holdings Ltd. The average turnover was estimated to be Kshs 52.2 billion with over 7,000 employees in East Africa.
Why Nakummatt holdings Ltd grew so big so quick
Indubitably, it without any forms of equivocations to note that Nakummatt holdings Ltd was phenomenally successful and its triumph can be attributed to myriad aspects that strengthened its presence in East Africa with over 60 outlets. The first conspicuous factors that propelled the growth of Nakummatt holdings Ltd was its sound financial base. The firm was well financed and had developed exemplary relations with creditors and the financial institution which could easily fund its ambitious plans in the region.
Secondly, Nakummatt holdings ltd was one of the local companies in Kenya that had one of the reputable and a competent management team. Their expertise was unique and within a few years, the company had established more than 45 outlets in Kenya, 9 in Uganda, 5 in Tanzania and three stores in Rwanda.
Undeniably, Nakummatt holdings ltd was one of the retail companies that had established the best supply chain in the region. The complex and yet efficient supply chain was able to link local and international producers, local consumers and regional outlets in East Africa. Delivery and replenishment of its stores were never late, and the stores were strategically set to benefit from the huge traffic in different towns and cities.
Partnerships with international firms like Revlon, Skechers, Clarks, L’Oréal and even Disney, made the company widely known and reputable. This helped to develop a formidable brand name in the market across East Africa.
The spoils hit Nakummatt holdings Ltd
Not so long did the firm begin its ambitious generic and expansion strategy when turmoil began haunting it. One of the factors that haunted the highly expanding retailer in East Africa was its ambitious plans that sought to solidify the brand within the region. In 2017, the defunct company was planning to open up a total of 18 new stores outside Kenya reach 70 stores in East Africa within 17 months. This was aspiring plans that needed many resources to sustain both the current and the new outlets being set up. Both physical, human and financial resources were key for the firm to attain its vision which was dubbed as a 1 year billion company in revenue.
However, with contained resources, Nakummatt holdings Ltd was incapable to open up a such an overwhelming number of stores and still maintain the current floor space. Operational costs continued to upswing with every new outlet that was established. To secure funds, the company had to advance products from creditors and suppliers with the promise of a highly expanding company that would never default. With continued pressure for more resources, the company found it improbable to sustain all its branches countrywide.
Employees’ salaries were in arrears more than 5 months and suppliers had been unpaid for more than a year. This was the tipping point for one of the once principal companies in the region. The situation caused a shortage of products and began it difficult to keeps some of the outlets open.
The firm hard and closed many of its outlets to cut back on operational costs but that was too much too little to save the company that was in the centers of collapse with many lawsuit cases by creditors.
Another problem that led to the collapse of the notable king in the East African retail industry was over-leveraging of the company by the management. Being one of the reputable company in the region, the management abused such privileges and instead embarked on expansion projects that were highly financed through debts and loans. As result, the company balance sheet could not balance off the liability it had. This cause the company to default on a sheer scale and most of the suppliers were alarmed and restricted further supply of products to the company. The situation caused a shortage of products and the retailer found it difficult to keep some of the outlets open.
Due to the ripple effects caused by the suppliers and creditors in the supply chain, the company was overwhelmed with the accrued liabilities inform of rents, employees’ salaries and creditors who were ready to auction part of the stores to recoup their money which was approximated as Kshs 35.8 billion, in January 2018, Nakummatt Holdings Ltd officially went into administration. And PKF Consulting Limited (PKF) was appointed as the official administrator. This marked the end to one of the once largest retail brand in East Africa.
‘Too Big To Fail’ for Nakummatt holdings Ltd?
The economic terminology ‘too big to fail’ was first coined in 1983 in the United States whereby the government feared the ripple effects from the Continental Illinois Bank in 1983 and the need for a bailout which could reduce the occurrence of systematic crisis emanating from the failure of the bank.
Too big to fail denotes a situation whereby a company grow so large that its failure would automatically affect the economy deleteriously. Therefore, the government is expected to take initiatives for its rescue process through bailout with the aim of plummeting fears of ripple effects from its collapse on the economy. The term does not relate to the size of the institution but however to the inter-connectivity of the institution. Therefore, the failure of such company is certain to result in multiple failures of various businesses regionally or globally economy. In summary, a corporation that is “too big to fail” is undoubted to be saved by the state, either directly via bailouts or even indirectly through a guarantee of a specific loan .
With over 65 outlets , Nakummatt holdings unquestionably had grown into “too big to fail’ within East Africa. In such a case, the concept denotes that the government should be quick to reduce the effects that such a company can cause to the economy. With over 7,000 employees, the Kenyan government was reluctant to bailout the retailer and much less was done to save thousands of jobs that the entity had created both locally and in the other East African countries.
The lack of the bailout to rescue such an interconnected company was a blow to the local retail industry that has now been saturated with foreign firms to capitalize on the gap left behind by the struggling Nakummatt holding Ltd. The fragility of the current retail industry in Kenya has because by lack of cooperation from the government to save locally owned stores and in essence, opening up the local retail industry to foreign companies. Nakummatt holdings had to close many of its outlets, and thousands of employees were rendered jobless.
The interconnectedness that Nakummatt holdings had established was a sufficient reason for the government to develop a special rescue vehicle that could have saved thousands of employees who were employed and the solidification of local companies in the retail industry as has happened in the past in different countries such as the US and other countries.