Reasons Behind Shoprite’s Planned Exit From Kano

Reasons Behind Shoprite’s Planned Exit From Kano

Retail Supermarkets Nigeria Limited, the owners of the popular Shoprite Mall, have announced their decision to cease operations at their Kano branch in North West, Nigeria, effective January 14, 2024. This decision was communicated through a circular signed by the management of the supermarket.

The circular cited the current financial situation of the mall in the state and the challenging business climate in the country as the reasons for discontinuing operations. The supermarket regretted the decision but emphasized its necessity, indicating that all employees at the mall would be laid off upon closure.

The underlying factors leading to the planned relocation include the significant monthly rent of N66 million paid by Shoprite to Ado Bayero Mall, separate from the expenses for independent electricity from Kano Electricity Distribution Company (KEDCO), and the costs associated with fueling and maintaining its standby generator. Additionally, staff salaries and other day-to-day operational expenses contribute to the financial burden.

A shop owner within the mall confirmed the validity of the reasons provided, noting a decline in customer patronage over the past two years.

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“Since the last two years, the entire mall has been witnessing reduction of customers due to the dwindling economic situation in the country.

“It is the elite that mostly buy expensive things from here, and they only form a minority of the customers. Secondly, they don’t come around often. Business can’t go well like that.

“The average Kano resident is struggling with finances and cannot afford to come and spend recklessly here.

“If you study carefully, the place has been reduced to where you come to buy time, take pictures and other things and move out. Averagely, people go into Shoprite to buy drinks, ice cream and chocolate that is not more than N1000. Now, looking at the kind of services they render, how much would they make in a month to pay N66million and get profit?”

Another businessman who owns a place in the mall but asked not to be named revealed that a medium business space in the mall is given out at the rate of N3m and N4.5m quarterly, which he described as too expensive.

“A shop like mine here starts from N3m to N4.5m quarterly, and this is beside electricity provided by the mall. We pay at least N120,000 to N150,000 every month for electricity.

“Majority of the shop owners are just struggling to stay afloat. I don’t think it is hard to say they are making that kind of money to pay their rent. They are just paying rent alone.

“Like the one next to me here, I know that he has other subsidiaries outside, and I believe those ones are the ones keeping the one here. You know some elite class would probably be comfortable coming to the one here than other shops that are much more public.

“Two people have confirmed to me that the mall here is the most expensive in the country compared to the ones in Abuja and Lagos,” he said.

Daily Trust on Sunday also examined the impact of this development on businesses outside the mall and how it could adversely affect them, given that the mall is surrounded by plazas housing various business entities.

Although some shop owners from inside the mall have reportedly relocated to these plazas, there is a prevailing concern that the departure of Shoprite could have a detrimental effect on these businesses as well.

Bashir Abdullahi also said, “You see, many people coming around here do so because of Shoprite. You can see different kinds of people and I don’t have to tell you.

“Some businesses here get additional customers because of the mall, and 80 per cent of them were coming to Shoprite before they saw us. It will surely affect our businesses here.”

The main reasons

The secretary, National Association of Supermarkets, Umar Habu Ibrahim, also said that while there are a lot of supermarkets that have closed shops in the state recently, the case of Shoprite is different.

He said, “There are a lot of factors responsible for the close down of supermarkets. One is the economic situation and the rate of foreign exchange and cost of transportation. It has affected them seriously.

“Games first exited for almost a year now. The reasons why Shoprite is closing is first, exchange rate because they import wares from abroad; secondly, it is not about patronage but non cordial relationship with Ado Bayero Mall.

“The mall, in my view,  has no strategy and policy where the common man can invest. They give out rent based on square metres. We are not used to that, and you have to pay monthly.

“There are at least 80 shops in Ado Bayero Mall, both big and small ones. And you are the one to pay for electricity, water and tax, aside the exorbitant rent fee. Many have gone there and exited, but the management of the mall doesn’t care.

“One thing that escalates the issue is that they keep increasing the fee almost every time. When they first came to the mall, dollar rate was not as expensive as it is now. They need to reconsider that, but they don’t.

“It is a problem with the management of Ado Bayero Mall. This is a place where almost 1,000 people are working.”

Asked about the association’s efforts in terms of intervention, he said that already, elders in the state, including politicians, had intervened but it was too late.

200 employees to lose jobs

Daily Trust on Sunday reports that at least 200 employees of Shoprite may join the league of the unemployed if the supermarket eventually closes its Kano branch.

A staff of the supermarket who disclosed this on condition of anonymity said they had begun searching for new jobs already while many others were confused.

These employees include cashiers, chefs, bakers, security guards, cleaners, among others.

“We are in a state of dilemma. Please, if you have something that I can do, you can help me. Most of us are now going out there, not knowing what to do or where to go. At least you can find more than 200 of us that would be laid off.

“You know that the economic situation in the country is difficult; and jobs are hard to find. Some of our colleagues have started searching, while others have gotten where to go already,” he said.

It’s worth noting that a similar popular supermarket in the mall, Game Store, one of the largest, had previously exited. Additionally, Filmhouse Cinema, still located in Ado Bayero Mall, closed down due to low patronage and increased rent.

According to the National Bureau of Statistics (NBS), Nigeria’s unemployment rate decreased from 33.3 percent to 4.1 percent, with approximately 3,567 jobs lost in the manufacturing sector in the first half of 2023 alone. An NBS report from November 2022 indicated that 133 million Nigerians were in poverty, exacerbated by the removal of petrol subsidies in the second half of 2023.

In response to Shoprite’s decision to withdraw its operations in the state, the mall’s management expressed dissatisfaction. In a statement by the mall’s director, Ike Okeke, it was mentioned that the management swiftly moved to invite other investors to fill the vacancy left by Shoprite.

The statement reads, “Over the 10 years that the company operated at the Ado Bayero Mall in Kano, we have enjoyed a cordial relationship.”

He added that it is the responsibility of all investors at the mall to make their business decisions without any interference from the management as it is a normal practice for tenants in all malls around the world to come and go, depending on how their interests are served or otherwise.

Apart from loss of jobs for Kano residents, an economist, Dr Abdulsalam Muhammad Kani said, “The store’s exit will reduce the internally generated revenue (IGR) and Value Added Tax (VAT) of the state.”

Kani, who further said the decision would disrupt business activities at the mall, urged the concerned parties to settle their differences.

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