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PC World Kenya reveals merger plan

by Stuart Wilson, Wednesday 20 April 2016

Kenya-based retailer and reseller PC World plans to merge its operations with a group of local investors who have a range of interests in various business sectors. The identity of the investors and the structure of the deal has not been disclosed.

Bobby Gadhia, CEO at PC World Kenya, told Channel EMEA: “This merger will see our company grow to the next level and maximise the full potential the market has to offer. After the merger we will have 12 retail outlets spread across the country and a workforce of approximately 100 people, so 2016 is a big year for us.”

Established in 1995, PC World currently has more than 15,000 square feet of office and retail space, 45 staff and annual sales in excess of US$5.5m. The company derives more than half of its sales from government, corporate and SMB business, with the remainder from its retail operations. At present, PC World operates five retail stores in Kenya.

Rapid growth

“The merger will allow us to grow rapidly moving forward,” added Gadhia. “The trend we are noticing is that with the increased traffic and congestion in the city, customers are becoming more decentralised and prefer to shop at stores and malls nearer to their homes.”

“With this trend we are forced to go nearer to the customer. With increased competition and awareness, customers are demanding better service levels, so we are investing in opening more outlets and staff training. Also the trend for online shopping is growing and this is an area we are focusing on a great deal,” he added.

Growth opportunities for tablets and hybrid laptops remain strong in Kenya and there is significant potential for expansion in the accessories space. Gadhia believes that the commoditisation of consumer technology products in Kenya is creating new opportunities for retail.

“We have been in business for over 20 years with a retail presence since the very beginning,” he explained. “We are the largest ‘structured’ ICT retailer in the country and we lead in this sector. We set the standard for others to follow. ICT retail in Kenya is still in its infancy. Our company is taking the lead in this area.”

Retail experience

PC World currently caters to the middle and upper income bracket customers where price sensitivity is lower, allowing the company to achieve better margins than some competing retailers.

“Others concentrate on the low income bracket where price sensitivity is high,” explained Gadhia. “Our business model is not based around price. It is based around experience and value for money.”

PC World believes that vendors and distributors can do more to improve the support they provide to retail partners in Kenya including the provision of demonstration units that allow customers to touch, feel and experience products in store.

“They also need to provide more marketing funds as it has become very expensive to do marketing alone,” continued Gadhia. “We need more incentive programmes for both the retailers and floor sales staff. Also we would like to see more rebate programmes implemented.”

PC World Kenya launched its website (www.pcworld.co.ke) four years ago and today it is offers full e-commerce functionality. The company continues to see more purchasing moving online, with many consumers accessing the internet through smartphones. Significant challenges remain for consumer technology retailers in Kenya, according to Gadhia.

Market challenges

“Some of the challenges we face are, high finance costs, plus parallel and grey imports due to high taxation – there is 16% VAT in Kenya,” he explained. While Gadhia is upbeat on the potential for accessories in Kenya, he believes that the current channel landscape is not yet ready or able to take full advantage of this opportunity.

“Unfortunately the mainstream distributors are not interested in stocking these products because they don’t know the retail game and the volumes are low,” he explained. “So there has to be a big shift in mindset and strategy to capitalise on these opportunities.”

“After our merger is complete, we will consider taking on the distribution of some products that fit in the retail space. We believe there is a big gap here [in the market] and we may exploit this opportunity,” Gadhia concluded.

UPDATE 22/4/16: Bobby Gadhia, CEO at PC World Kenya, has informed Channel EMEA that the expected date for the completion of the proposed merger agreement is the end of May 2016.

DISTREE Africa 2016 (www.distree-africa.com) will take place on the 6-8th June in Nairobi, Kenya. The three-day channel event provides a powerful business development opportunity for vendors, brand owners and international distributors looking to manage, build or launch routes-to-market in some of Africa’s fastest growing technology markets. Channel EMEA is an official Media Partner for DISTREE Africa 2016.

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