The growth of the retail market in Nigeria with a significant number of malls springing up in many of what are now known as second tier cities outside the mega cities of Abuja, Lagos and Port Harcourt, is seen to have a squeezing impact on the traditional informal retail stores in the not-too-distant future.
Analysts’ projection is that in the next five years, malls in second tier cities will become increasingly more acceptable than the existing traditional informal retail stores. They add however, that such acceptance will not be on the same scale as malls in the more sophisticated cities.
They explain that in the second tier cities, consumer spending is not as strong as that of the major cities and that traditional markets and stores will continue to appeal to consumers in those locations, with their traditional stocks which give them some level of advantage over the malls.
The last few years have seen new investors and retailers in relatively smaller cities like Enugu, Onitsha, Ibadan, Ilorin, Kano and lately Delta and Owerri, where Resilient Africa is developing two malls with strong determination to open for business in March and December 2015 respectively.
Lilian Agbakoba, the CEO of Berverly & Sam Properties, developers of Purplestone Mall in Apo, a suburb of Abuja, disclosed to BusinessDay that they have a plan to develop malls in towns and cities of Asaba, Abeokuta, Lafia, Ikorodu and other locations, with the aim of reaching middle income earners who also hunger for modern shopping experience.
Michael Chu’di Ejekam, Director, Real Estate at Actis, told BusinessDay that the market has continued to record strong annual growth, such that retail sales have risen from $106 billion in 2011 to $160 billion in 2014 , making Nigeria the largest retail market in Sub-Saharan Africa, surpassing South Africa. Ejekam adds that it is expected that by 2016, retail sales would reach $198 billion.
Amidst this growth is the fear that the traditional informal stores might be pushed out of business, as many of them will lose patronage from the emerging middle class which has been identified as the major driver of retail growth with their high spending power, growing sophistication and changing taste.
“The market has seen a major shift from the purchasing of essentials to more income elastic items which is a major attraction for the planned entry of many brands that relate well with Nigerians”, Ejekam said, adding, “over the next five years, brands such as Zara, Gap, and Tommy Hilfiger will proliferate in the marketplace”.
Bolaji Edun, the CEO of Broll Nigeria, agrees, adding that in Abuja, House of Tara and Audacious have set up shop in Ceddi Plaza, while landmark brands such as Babyshop, Lifestyle and Splash have signed on to the Artee Group, which once disclosed plans to open 100 stores in Nigeria in three years.
In their third quarter report on the performance of the retail market in Nigeria, Edun noted that malls in second tier cities are focused on groceries which are central to emerging markets, explaining that this was a consequence of the disparity in purchasing power between most second tier markets and malls in first tier cities in Lagos and Abuja.
“Our expectation is that in the next five years, malls in second tier cities will become increasingly more acceptable than traditional informal retail stores although not on the same scale as malls in the more sophisticated cities of Lagos and Abuja”, he posited.
CHUKA UROKO
