Cash-strapped Uchumi sheds top managers in Sh10m plan

What you need to know:

  • Uchumi’s unclaimed customer loyalty points currently held are worth Sh239 million, according to the retail chain.

Struggling supermarket chain Uchumi has embarked on shedding top managers to cut down costs.

The retailer confirmed “releasing” 16 managers last week in a programme meant to cost it Sh10 million.
Uchumi Chief Executive Officer Julius Kipng’etich said the move did not target any specific branch and was carried out on voluntary basis.

“The exit of 16 branch managers is pursuant to a voluntary early retirement exercise. This exercise, which we are carrying out across all our 20 branches, will be done at a cost of Sh10 million,” Mr Kipng’etich said last week.

There were reports from the retail chain’s quarters that managers were being forced to retire, with the Capital Centre branch on Mombasa road being heavily affected. The exercise was started in June but went on quietly until Friday, when some staff raised the red flag on the exits.
The chief executive also defended the move to freeze the redemption of loyalty points by customers since May.

The move — which was seen by customers as the retail’s sign of sinking, coming at time creditors had threatened to liquidate Uchumi — was widely criticised on the social media.

The loyalty points are “rewarded” to customers on the basis of their purchase value, and are later “redeemed” mostly as payment for shopping or other gifts in kind.

“We suspended the redemption of the U-card points temporarily in May 2016; however, customers can still earn and accumulate loyalty points. Redemption is expected to resume by the end of the year,” Mr Kipngetich said in an e-mail response.

Cost of wooing customers

Uchumi’s unclaimed customer loyalty points currently held are worth Sh239 million, according to the retail chain. The points were just Sh26.1 million in the period to June 2014 compared to Sh12.3 million a year earlier, signalling the rapid growth and the increasing cost of wooing customers in the wake of competition in the retail sector.

The reward plan was launched in 2006 and allows customers to redeem a minimum number of 100 points in exchange of shopping voucher(s) equivalent to the redemption amount.

In June, Uchumi filed an appeal against a court decision that allowed its winding up case to proceed to full hearing.
Granted protection

The retailer, which wanted to be granted bankruptcy protection, had been caught flat-footed after High Court judge Farah Amin ruled that the winding up case should proceed.

The move disrupted the temporary lull by the suppliers, who wanted the retailer wound up, with about 100 of them agreeing to resume stocking its shelves with goods under an arrangement that gives them control over how they get paid.

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