Nigeria’s wholesale and retail sector keeps attracting attention. Shoprite, the South African food retailer, opened a second store in Ibadan, its 10th and biggest in Nigeria, so far.
Fast moving consumer goods companies are keen about the future of retail business in the country. Nigeria’s slowly but steadily growing retail sector is adapting to the demands of consumers. And the expanding presence of local and foreign malls across the country shows these consumers are not all in Lagos.
Lagos, always open to business, is the obvious first port of call for retail companies. The state wants to alleviate poverty and promote sustainable economic development by focusing on power generation, agro-allied businesses, intermodal transportation and housing. A cluster for small to medium scale enterprises and two allied parks are underway.
For foreign malls, thinning margins in the developed economies coupled with slow economic growth has made the search for new markets imperative. Nigeria and Morocco, according to Accenture, have drawn the attention of retail giants like Walmart. Kenya, based on the Nielsen Emerging Markets Insight, has the highest penetration of modern retail channels Africa’s growth isn’t driven by oil and copper alone.
Accenture estimates that by 2020 Nigeria’s expenditure on non-durable goods will be N13 trillion naira; the agriculture, financial and real estate sectors are expected to be beneficiaries as capital accumulates and the retail sector evolves. Inadequate logistic; limited access to credit, for micro businesses and the slow adoption of online payment may delay this evolution, but it won’t stall the emergence of multiples of local and foreign retail businesses.
Nigeria’s population is young. A significant proportion of Nigeria’s population is 20 years and below. They are migrating from the rural to urban areas of the country with aspirations fuelled by their access to satellite TV and mobile internet.
Consumers in Africa in general and Nigeria in particular cannot be ignored. “Africa has 8 countries with a higher GDP per capita (purchasing power parity) than China and 15 higher than India”, says Nielsen, a market research firm.
Africa’s rising consumers are the reason why the continent’s retail sector is the third fastest growing in the world, reckons McKinsey, a consultancy. Wholesale business on the continent, the second major contributor to Africa’s growth, may be negligible, relative to other parts of the world, for now.
According to McKinsey, several trends are driving retail penetration on the continent. A young optimistic emerging middle class based in 50 urban areas across the continent are demanding well priced consumer products that are of good quality.
Though television and word of mouth are the greatest influences, the media habits of African consumers are changing. They are accessing the internet via ubiquitous mobile phones. McKinsey warns that businesses looking to expand into Africa must mind the gap: Africans have distinct and regional differences.
For instance, three-quarters of Nigerians surveyed by McKinsey are convinced that future will be better. They are the second most optimistic Africans, after Ghanaians. They prefer their food fresh. Affluent consumers mostly prefer red meat, rice and beverages while the less affluent like rice and vegetables.
Nigeria’s young population are loyal to brands, if the price is right, and they trust the product’s quality. Many may not be making purchases online but they are media savvy, want to shop in well-lit modern malls and, see and hear sophisticated adverts even if it’s in pidgin.
Accenture says these changing habits have led to three mega trends: the polarised, expectant, inter-connected consumer. As a result, retail businesses will have to learn to differentiate, explore reaching consumers via multi-channel advertisement and distribution outlets, and match consumer expectations.
Nigeria’s 170 million and growing consumer market is a retailers’ delight despite the dearth of a culture of service, underdeveloped infrastructure, a disorganized and fragmented retail landscape, lack of reliable market research, unclear and ever-changing government regulations and a severely limited talent pipeline.
The young and bright future of retail in Nigeria is hinged on Nigeria’s positive demographics, changing cultural and societal behaviour. These immense opportunities demand a knack for adapting. Nigerians are fast learners and replicators. Competition will come from local and foreign players. Shopping and eating are becoming more and more a family affair, me-too malls are springing up; savvy Nigerian businesspeople are opening chains of neighbourhood stores.
In addition, the drive of state governments to increase internally generated revenue, the central bank’s cashless policy and the proliferation of supermarkets will lead to formalisation of the informal market.
Many more stand to benefit as value chain extends to the farms and local agri-businesses. There are other unmet needs in distribution e.g. supply chain specialists that can provide refrigeration, central depots, stock management and just-in-time services will be a boon for those who spot the gap early and learn to stay ahead of the curve.
To expand the business and job opportunities in the retail sector commercial banks must small business access loans. A retail academy, too, would be handy.
