African prospects bright for SA’s retailers
IT-Online - May 15th 2018, 10:03
South Africa’s retail sector is well-developed compared to the rest of the continent, and still has the edge over international competitors when it comes to expansion into Africa.
The Euromonitor International report, “Shifting Market Frontiers: Africa Rising” looks at the continent’s retailing environment among other key factors like the increasing significance of the African market, the diversity of African consumers as well as opportunities and challenges across key consumer industries in Africa.
A key finding is that traditional and informal retailers dominate the market.
The African retailing market recorded value sales of over $350-billion in 2017. Sales were driven by non-grocery retailers, such as furniture stores, electronics and appliance, beauty, and apparel outlets, which accounted for 44% of total retail sales in the region.
Traditional grocery retailers ranked second, generating sales of over $125-billion.
Traditional grocery retailers remain one of the largest channels in many countries across the continent for food and drink purchases. This channel includes convenience stores such as kiosks, small independent retailers, food/drink/tobacco specialists, liquor shops, and fruit/vegetable grocers.
Increased income inequality will only continue to promote informal retailing across the continent.
The report points out that South Africa is unique among African countries, having a well-developed modern retail sector, compared to the rest of the continent, at over 70%.
For other major economies, such as Nigeria, the country’s retail market continues to be dominated by traditional informal channels, such as open-air markets.
Nigeria lacks strong formal representation, with modern retail penetration estimated at 5%; this contrast between South Africa and Nigeria highlights the scale of the retail opportunity in Africa, as many consumers’ purchasing power still remains relatively low as they are underserved.
Modern retailing in other countries, such as Cameroon, Ghana, Ethiopia, Angola and Kenya, is also underdeveloped.
South Africa’s developed retailing provides greater brand diversity, and supermarkets remain the most popular channel for groceries in South Africa.
This is largely due to its massive footprint and widespread geographical presence across the country.
Often associated with major city centres and shopping malls, they attract a wider mix of retail outlets, which is an attraction to those seeking more affluent brands.
Several international retailers are seeking to expand their operations in the region, particularly in major regional economic hubs, such as South Africa and Nigeria. However, local retailers such as South Africa’s Shoprite Holdings and Pick ‘n’ Pay Stores continue to dominate retail sales.
Similar to multinationals, many African companies are expanding regionally through merger and acquisition activity.
Spaza shops, kiosks and dukas are found in high-density residential areas such as townships, informal settlements and rural areas. They are known across the region and continue to be consumers’ affordable convenience stores.
These outlets remain an important part of the retailing landscape in African markets.
Shoprite Holdings, headquartered in South Africa, is the region’s largest food retailer, operating more than 2 500 stores in over 15 countries in Africa. Shoprite is supported by a diversified portfolio across multiple distribution channels.
Its focus on Africa’s growing middle class, particularly in places its competitors have not yet dared to venture, has helped drive rapid expansion. The company continued to diversify its consumer base by launching discounter USave, used as the groups’ expansion vehicle, into previously under-served communities in the region.IT-Online
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