Nigeria, a dramatic retail opportunity

Transcription

1 Nigeria, a dramatic retail opportunity burgeoning middle and consumer class consumer confidence improving, spending increasing...opportunity has road blocks too By Our reporter. Nigeria strongly exhibits strong elements of what has variously been described as economic or development dualism. This means, according to the proponents of the concept, the existence of the traditional subsistence sector which consists of small-scale agriculture, handicraft and petty trade, with a high degree of labour intensity but low capital intensity and little division of labour. At the same time, the country has a modern sector of capital-intensive industry and plantation agriculture that produces for the world market with a capital-intensive mode of production and a high division of labour. Apart from dualism, Nigeria also has a large informal sector and has been struggling to lower the barriers that have separated both the formal and informal sectors of the economy. It would seem, however, that both the formal and informal sectors are growing but the ideal situation would be to pull in the informal sector into the formal sector in order to be able to measure the size or strength of the economy and to force real and inclusive growth. However, things are looking up generally for Nigeria even as she continues to maintain the posture of 1 / 5

2 development dualism. If nothing else, the country is edging closer to becoming a major destination for international retail investments. There is evidently a rise of a burgeoning middle and consumer class. A popular business school estimates the population of the middle class to be somewhat in the region of 38 million. Apart from the huge population, economic growth is also considered as an investment motivator, in spite of the country s limited or inadequate transportation, logistics, power and financial infrastructures. These are apparently being addressed as it will spur a robust retail development. Resilient Africa Holden Marshall, managing director of Resilient Africa is particularly upbeat about Nigeria s potential. He was quoted by Kate Douglas of How we made it in Africa, as saying that the demand for more formalised modern shopping is massive. According to Marshall, although Resilient Africa is securing sites to develop malls in the popular retail hubs of Lagos and Abuja, the company is also targeting a number of other sites. He said that the Delta City Mall for instance, would be completed in November next year and that the South African company had either secured or in the process of securing sites in Asaba, Benin City, Port Harcourt, Owerri, Yenagoa and Abeokuta. Marshall stated that each of the 36 State governors is, at present, seeking to have a mall in his capital city. Marshall estimates that about 20 per cent of the population here in Nigeria have a good income. They are therefore considering a target market in these areas of between 200,000 and 300,000 people that are the right profile for malls. Marshall also said that the interest they have seen from South African retailers looking to secure spots in Resilient Africa s malls have been quite substantial in the last six months. The retailers include the Edcon Group, Foschini Group, Mr Price and Massmart. He said that there are six or seven high street brands of South Africa that are expanding their side. At this point probably, 40 per cent of our malls will be occupied by recognised South African brands and 60 per cent by Nigerian established retailers, but most of them trading under master franchise agreements with European brands such as Puma, Nike, Addidas, he said. The major sort of UK/European fashion brands are starting to establish themselves through master franchise arrangements with existing Nigerian retailers. Holden Marshall said that Shoprite would hold the anchor position in all the Resilient Africa s malls. The company has been rapidly expanding across Africa and has close to 200 supermarkets in 16 countries outside of South Africa. Shoprite in Nigeria 2 / 5

3 Kate Douglas also reported that Shoprite s CEO Whitey Basson said the grocer is in process of adding 37 stores to the seven it currently has in Nigeria, noting that Nigeria can handle between 600 and 800 Shoprite stores. Marshall described the partnership between Shoprite and Resilient Africa as a strategic move. Their game is retail and that is what they want to focus on, so doing a joint venture with a developer assists them greatly with their roll-outs, he said. GRDI on Nigeria In spite of this development and the prospects described, Nigeria is yet to feature in the A.T. Kearney Global Retail Development Index (GRDI), which finds a wide array of possibilities for retailers seeking to capture an immediate impact and a growth advantage in developing countries. GRDI explains that while Europe was facing economic turmoil, developing countries forged full-speed ahead. It states: With consumer confidence improving and spending increasing, global retailers continued their expansion into these markets. In the past five years, U.S.-based Wal-Mart, France-based Carrefour, U.K.-based Tesco, and Germany-based Metro Group saw their revenues in developing countries grow 2.5 times faster than revenues in their home markets. Botswana entered the rankings of the GRDI in 2012 and was the only country in Sub-Saharan Africa to make the list, highlighting the region's long-term growth prospects. In coming years, we expect global retailers to evaluate many other African nations as Nigeria, Ethiopia, and the Democratic Republic of Congo (DRC). These countries are expected to be among the most populous countries in the world by South Africa dropped from the rankings in 2012 because of market saturation of international retailers compared to other countries in the GRDI. The report states that Gap and Zara opened stores in South Africa, seeing it as a stepping stone to the rest of Sub-Saharan Africa. 3 / 5

4 GRDI also states that South African grocers have a dominant presence in Sub-Saharan markets: Pick 'n Pay and ShopRite plan to enter the DRC and Malawi soon, and Woolworths recently opened stores in Nigeria. The report states that South African retailer JD Group is expanding in the next 18 months to Zambia, Ghana, and Mozambique and is considering opening operations in Angola. The two North African markets featured in the GRDI in 2012, Morocco and Tunisia, have watched their rankings drop seven and 12 positions, respectively, because of regional political uprisings. Still, there are signs of growth as the markets stabilise and stores reopen. What benefits to the host community? The benefits of having many global retailers are enormous. Apart from job creation and skills acquisition opportunities, they will help to create the much-desired orderly marketing; they will attract many other foreign direct investments, especially the manufacturing operators; they will encourage the development of tourism and improvements in the business environment. They will stimulate demand as well as consumption and draw domestic investors into the manufacturing culture. They will promote innovations, hygiene and wholesome packaging. They will help to expand and beautify the inner cities where they are located and create other related and unrelated opportunities. All told, the advantages of having them outweigh the disadvantages. It will be necessary to read the article below titled Beyond city limits to appreciate that it is all about the wind of change. Global retailers are taking advantage of the demographic and structural changes taking place globally. 4 / 5

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