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The Need for Innovation in Retail in Africa

At the Retail Innovation Hub, we are always looking out for interesting happenings and the latest advancements in the sector. But it’s not all holographic sales assistants and the teleportation of products. There are still parts of the world where the retail industry is very much in a state of flux and trying to find its way.

Although not so long ago, Africa was dubbed ‘the next Asia’, a decline in global commodity demand and continuing political strife has slowed things down. However, with a huge, young population and a wealth of natural resources, retailers would be unwise not to look for opportunities to innovate.  Here are the facts that set the scene for the retail landscape:

The Possibilities for Retailers:

  • Africa is home to more than one billion people which is expected to increase to more than two billion by 2050.
  • 226 million people aged between 15 and 25 years which means it’s working age population is forecast to grow at a faster rate than its overall population.
  • Urbanisation in Africa will increase to 56% in 2050 from 35% in 2010, making it the most rapidly urbanising region in the world. Moving to cities makes it easier for companies to target certain consumer groups.
  • The African Development Bank estimates that consumer spending will
    reach US $2.2 trillion by 2030.
  • An increasing number of consumers are on the cusp of the US $1,000 annual income level, which will allow for the expansion of consumption beyond just the basics.
  • Africans are becoming more connected to global trends than ever before as a result of growth in internet penetration and travel. With underdeveloped brick and mortar retail, e-tailing holds a unique value proposition.



The Challenges for Retailers:

  • There is a huge variety of languages – South Africa has 11 official languages. Nigeria has one, but Nigerians speak more than 500 local languages.
  • Only about one-third of Africans live within 2 kilometers of a paved road that is usable year-round.
  • Upwards of 90% of sales in the focus countries is through informal channels such as markets, kiosks, table-top sellers and street hawkers.
  • About 70 percent of the population has no access to electricity.
  • There is continued political strife, violence and corruption. Of 54 African nations only 10 are considered free, 22 are considered partially free, and 22 are considered not free.

So baring in mind this complex landscape grasping at modernisation against a backdrop of poverty and regressive dictatorships, how can retailers make an entrance?

Think Local

Africa is such a huge mix of cultures and landscapes, it has to be broken down into a number of different opportunities, rather than one big one. Those who have done it best think very carefully about where they enter, starting with urbanised centres where income is higher, although there is very little data available on African consumers, making it harder to pick your starting point.

Some brands have also adapted their identity at a level as granular as city level. SABMiller beer, for example, created a beer specifically for a large city in Nigeria, featuring a rising sun, the symbol of the people. It was also less bitter making it better to drink in hot weather.

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Do Not Ignore the Homegrown Retailers

Local production is becoming increasingly popular in order to dodge high import taxes, port delays and high transport costs, although lack of power supply and high labour and rental costs make it hard for smaller companies to break through. South African retailers are some of the most successful so far and in countries like Nigeria, Kenya and Ghana, large, where western style malls are breaking through, many of the malls are anchored by South African retailers.

Solve the Distribution and Supply Chain Problem

As it’s not hard to imagine, transporting goods across a terrain as vast and lacking of infrastructure as Africa is no easy feat. What’s more, many Africans shop at local markets, neighbourhood kiosks or independent shops which means distributing products into millions of unofficial hands. If technology could be used to make this happen, it would be a huge winner for who ever cracked the puzzle.

Start Now

As many Africans are brand-loyal, it is important to enter the market at a relatively early stage, in order to establish a place in their hearts and minds. As many of these are living close to the poverty line, one strategy could be to work to capture the large low-end of the market and then benefit from higher margins as these consumers start trading up.

Case Study – Shoprite

One of the most successful retailers across Africa is the Shoprite supermarket who have gone from just 8 poorly performing stores to obtaining nearly 35 million customers across the continent. It’s now the 94th biggest retail group in the world. Read more about it’s successes, and how it’s wrestled with some of the challenges outlined above, in this Quartz Africa article below.

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