Africa can be a challenging place to do business from infrastructure issues, complex compliance, fragmented markets and dispersed populations and particularly post pandemic, harder lives for ordinary people. One cannot ignore those who have gone before with Massmart announcing earlier this month the sale of Game stores in Kenya, Nigeria, Ghana, Uganda, and Tanzania, citing a need to focus on its “core strengths” as group losses narrowed during the half-year ended June 2021. Others followed suit such as cinema group Nu Metro, fast food giant Nando’s, Supreme Furniture and magazine publisher Media24.
On the one hand, as noted in a recent Labour Research Service report  Africa has the fastest rate of urbanisation in the world, with predicted spending power of USD 1.3 trillion come 2030. And on the other, with an awareness of big brand disinvestment as chain retailers are not necessarily looking at Africa with the same eyes anymore, this is a continent that will continue to attract a calling card of suitors who despite the challenges want to re-shape, re-invent and innovate.
What works and what doesn’t should shape any critical thinking strategy as the old African adage “challenge equals opportunity” can never be far from the truth. Sub-Saharan countries are promising for retail development as indicated in a report by Scientific Research Publishing [June 2021] where managing the costs of doing business will always be the key focus. More recently, challenging times have given consumers and retailers opportunities to leverage available business platforms within ecommerce in particular, across many Africa countries, resulting in both parties leapfrogging to new business models with reduced reliance on brick-and-mortar stores, the most notable examples being South Africa and Nigeria.
From a global perspective 2021 is seen as a year of transition, as pointed out in a McKinsey article – as individuals, businesses, and society start to look forward to shaping their futures rather than just grinding through the present. Focusing on Africa specifically as reported in African Business, it was noted that reform in Africa is not happening fast enough with the result that some retailers are exiting their investments due to – the tendency for some retailers to go big in countries based on the size of the opportunity, while the real need is much smaller; a lack of locally available equipment, power and water deficits etc raising the issue of cost; the tendency of global brands to either sit on the fence or distribute through small franchises and finally, inappropriate business models not tailored to local conditions or flexible enough to roll with the punches.
That said, the fundamentals that have attracted investors have not changed, namely the lack of competition in many sectors, growing populations and an expanding middle class. African markets need a long-term strategy and retailers with an eye to expanding into Africa must pay close attention to the many factors that make up the marketing environment so suggests www.journals.sagepub.com. To be successful in Africa, the commitment of physical resources should be done slowly as well as partnerships created to do business with local suppliers who have the experience of open markets.
Taking a snapshot of Kenya for example, Standard Banks Africa Consumer Insights Report [Dec 2020] noted that consumer spending in the region was expected to grow by 4.8% last year and that in the medium term the outlook is constructive, with an expansion in the middle class, a well-established retail sector and overall improved income. On the downside, inflation in Kenya is set to rise based on food and fuel price increases. Understanding regional nuances in Africa and the differences that make up shopper diversity is critical. For example, of all the countries surveyed Kenya is the only market that provides a wide variety of the same product at different price points. Toothpaste is a good example with not only varied price points but also flavours, and sizes and Unilever’s Geisha brand, found to be one of the most prominent soaps with preferences showing that consumers prefer anti-bacterial soaps.
A developed omnichannel approach is key in Africa as consumers are becoming more savvy post pandemic, as well as being exposed to various brands across the globe.
Retailers will have to be flexible to remain relevant.
The pandemic exposed inefficiencies in retail supply chain management in Africa. This could be lessened to a certain extent, through local sourcing and purchases. While Forex losses and repatriation are an international retailer’s headache – buying local can alleviate this especially in the food industry and FMCG.
Retailers need to offer a differentiated customer experience at every touch point of the journey – where they develop a culture of giving more that is expected to maintain growth and market share.