BY NBM WRITER
It has been interesting to see how businesses run by families and friends perform especially when listed. As always the case, family controlled ventures would rather remain private. But that is set to change especially with the introduction of the growth and enterprise market segment which has, sort of, made going public more attractive.
Founders now move to public space with a local retail chain under Kshoe brand starting the drive in June. The second, and the first fashion and lifestyle house to follow the same path psyched that their value will pick up in the long run is Deacons East Africa. The retailer’s listing of 123,558,228 shares on the Nairobi Securities Exchange (NSE) in an offer price of Sh15.00 valuing the company at Sh1.85 billion on the NSE paves the way for a five-year strategic plan that aims to expand regional store count to 60 and grow annual revenues to Sh6 billion.
Deacons, which among its brands count Mr Price, Truworths, Angelo, 4u2, and Baby Shop heaps the deck in its favour opening the window to other entrepreneurs aiming to scale their ventures by shading off the thing about “private” as far as family run businesses are concerned. It has been here since 1958, employing Kenyans and has come of age now as a public listed company and it allows Kenyans as well as East Africans to own part of it.
Ideally, Deacons Chief Executive Muchiri Wahome says the retailer plans to embrace a franchising model to help it expand in the counties, and has identified Kisumu, Mombasa, Nakuru, Eldoret, Naivasha, Nyeri and Nanyuki as towns with a vibrant middle class to serve as it spread its tentacles to Rwanda and Uganda.
“That’s going to be a big plus for us,” he says. “It gives us an opportunity to continue to grow because we expect the Deacons will be here beyond our times. And because a business listed under Capital Markets Authority operates under very strict rules, but allows shareholder of the business to really see value of their shares from a market perspective.”
Even so, experts argue that investing in new listed companies is a huge gamble. Prices usually take a dip before they gradually pick up pace. They say the market is still depressed, and with the General Election just around the corner one ought to be patient, very patient to see gains. Although it is the time to buy value (which means you board the vehicle for long term and avoid speculation like plague), this milestone of Deacons is coming at a time when listing of private firms in the growth and enterprise market segment is still a new thing altogether. Theirs has been a tale of resilience finally paying off and now Mr Wahome is excited about the future.
“We do a lot of visibilities to understand each market and how it is growing, where it is headed,” he says, adding that Devolution is a silver lining for them. “You will be surprised at how much resources are being angled towards counties. What we call secondary towns. There are a lot of resources going that way.”
Secondly and more important is how the firm boasts of internal data of how many customers travel from Kisumu, from Eldoret, from Nakuru to the capital city, to consume their goods. Citing Deacons of old, Wahome says they actually traded in small towns (at the time Provincial headquarters) so they are aware of the market base that is available there regardless of the challenge of the ‘can we get the right product with the right value proposition that fits into those towns?’
In some cases, e-commerce platform is something that every retailer around the world who is worth their salt must use in order to increase their revenues. In 2014, Communications Authority of Kenya estimated the value of e-commerce in Kenya at Sh4.3 billion compared to South Africa’s Sh54 billion. Looking at Rupu or Jumia in Kenya today, you can see that they are fairly active trying to compete traditional retailers. OLX is also fairly active, linking buyers and sellers at no cost. Thus for the fashion retailer, pulling it off online is also an opportunity for their customers especially the younger generation most of whom have the Smartphone and can access goods and services in a press of QWERTY keyboard.
“It is a global trend that we must embrace and we hope that it will also bring additional revenues to our business,” says Wahome, who thinks the lowest moments particularly in emerging markets is “obviously the shocks” that come through the market that entrepreneurs have no control over. He points out at late last year when the devaluation of the shilling from 80, 83, and 84 to 102 took them by surprise. Then the Teargas Monday, which came and disrupted businesses and messed up projections. And not to forget is the Westgate attack – across the country customers were shy to go into malls.
“It is those days that are frustrating because you cant effectively do anything to change your fortunes… There’s no way you can plan for it and it hits you hard from an operating cost perspective. You have no explanations for it and you have no mitigating factors for it, it is those things,” says Mr Wahome.
But a mid the gloom the man has reasons to smile. He goes to the stores, and was even there two days prior to the bell ringing, serving customers, it is about customer experience. He feels good when the customer says ‘thank you, that was good!’