18 February 2019

Kenya: Mall Builders Faulted for Ignoring Smaller Cities

Mall developers and other businesses shun rural populations despite potential for huge margins provided for businesses, a new report shows.

The report by Fraym, a geospatial data company that tracks consumer insights, says Kenyan companies have limited their focus to a handful of major cities, but there is a huge " fast-growing consumer potential of Africa's secondary cities."

"Consumer-focused companies in Africa typically limit their focus to a handful of national capitals or major cities. This approach is understandable, given that these urban centres are dynamic economic and population hubs," said Fraym chief executive Ben Leo.

"Outside of these first-tier cities, actionable information becomes scarcer -- and yet there are significant opportunities, particularly for companies looking to claim first-mover advantage for their specific product or service."

The report says that as of 2017, there were 2,400 burgeoning second-tier or intermediate cities worldwide, with nearly two-thirds in Africa and Asia.

"In fact, worldwide, many second-tier cities are outperforming primary urban hubs in Gross Domestic Product (GDP) growth.

"This presents significant opportunities, particularly for companies looking to claim first-mover advantage for their specific product or service."

County economies

The report's findings' come as Kenyan developers set their sights on county economies, banking on the rising disposable incomes to attract shoppers into malls.

It argues that while firms including developers build more malls in urban suburbs to tap the growing middle class market, the future profitability of such mega projects lie in overlooked areas where middle-income earners are settling away from the cities.

"By weaving together satellite imagery with multiple data sources including surveys, mobile data and remote sensing data, and then applying machine learning algorithms to these layers of information, it was possible to find a significant number of top-tier consumers in Kisumu, Eldoret, Mombasa and Nakuru," said the report.

Britam Asset Managers earlier said in a separate study that an oversupply of shopping malls in cities and their environs is likely to spell trouble for developers.

The 2017 report said glut in malls countrywide was expected to make it harder to get tenants.

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