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Consumers are sticking to frugal shopping habits developed during the recession even as Nigeria’s economy begins to show signs of recovery, and this is becoming a major source of worry for retailers especially in the luxury segment.
BusinessDay investigation shows, consumers are flocking to discount stores, shifting from branded goods to private-label alternatives and shopping more often at convenience stores.
These trends have benefited retailers that have networks of smaller stores, prompting consumer goods firms to retaliate with brand promotions and smaller packaging.
A report by the National Bureau of Statistics (NBS) on Nigeria Gross Domestic Product shows, the Nigeria economy in 2017 recorded real annual growth rate of 0.83 percent in 2017, however the trade sector annual contribution to GDP dropped to 18.97 percent in 2017 compared to 20.37 percent recorded in 2016.
Despite the trade sector recording an annual nominal growth rate of 4.34 percent it remains lower than 2016 annual growth rate of 14.68 percent.
“If you look at the data, Nigerians are still conscious of spending, remember the country is just coming out of recession a lot of people lost their jobs during that period, hopefully by the time the First quarter GDP figures are released we will be getting a better consumption data,” Ademola Alabi a consumer analyst and consultant told Business Day.
Basil Hammed CEO Basiton Fashion store in Surulere, confirmed the trend as he said consumers are still in the place of tightening their belts and watching how they spend, “that’s not a change that is going to quickly reverse.”
Figures released by NBS on Foreign Trade in Goods Statistics showed importation of footwear, headgear, umbrellas, and sunshades, dropped by 8 percent to N39.8 billion in 2017 compared to N43.4 billion in 2016.
Similarly, a report released by US management consulting firm, AT Kearney’s 2017 Global Retail Development Index (GRDI) revealed that Nigeria’s retail sales dropped by 16 percent to $105 billion in 2017 from $125 billion recorded in 2016.
In the report, Nigeria dropped down to 27th from 19th position last year out of the 30 developing countries surveyed largely due to the significant drop in purchasing power parity, from $6,185 in 2016 to $5,930 in 2017.
However, the report says Nigeria remains an attractive destination for e-commerce companies, with online retail expected to grow at a double-digit rate through 2020.
Emmanuel Morka a lecturer in marketing, Delta State Polytechnic also expects the squeeze on mid-range products to persist, predicting that premium products will struggle to make sales till second quarter, when proper election spending begins.
“Nigerians are still struggling with the aftermath of the recession, people are now more aware of the value for money but also want to indulge themselves, and go for cheaper products, or products with discounts,” Morka said.
A visit by BusinessDay recently to some Lagos malls revealed that the huge traffic of customers are returning, however it is still a long way off from the levels seen before onset of the recession.
Few store operators who spoke with BusinessDay expressed further optimism that things will get better as the election period draws nearer.
“Our sales are yet to improve, the economy has recovered but I am yet to feel it in my books. Hitherto we used to make over N10.5m in annual sales but our sales for last year stood at N5.5m. Many of my colleagues were laid off last year,” a manager, at an accessories shop in Yaba Mall complained.
Another store Manager at the mall who gave her name simply as Funke said sales are yet to pick up but they have managed to stay hopeful.
Interestingly, traders at popular Balogun market in Lagos Island told BusinessDay that sales have improved.
One of them Loveth Orji, who sell used cloths, said her sales improved in February.
“I have more customers coming to buy from me compared to last year,” she said.
During a visit to a luxury goods stores in Surulere, one of the store attendant Iyabo Salami said she can remember when shoppers came in droves to buy expensive wines.
For Salami, all that now seems like the distant past.
“The market has been very terrible, especially in January, and last month,” Salami said.
“Before now, I used sell at least four cartons of wines in a day but now what we see is what we get,” Salami said.
DAVID IBEMERE
