Modern chains are struggling to grow due to currency devaluation,
Despite the many challenges hampering traditional retail in Africa, including the expansion of modern retail, the nascent rise of e-commerce and changes in consumer behavior that have been accelerated by COVID-19, more than 600,000 small shops and open-air markets dominate the retail trade. landscape in Nigeria, accounting for more than 97% of national food, beverage and personal care sales, according to a new report from Boston Consulting Group (BCG).
The report entitled: “The future of traditional retail in Africa” reveals that despite the advance of supermarkets, convenience stores and other modern formats, African consumers on average continue to buy more than 70% of their food , drinks and personal products. skincare products from more than 2.5 million small independent boutiques on the continent.
Specifically, BCG’s study of more than 4,500 small retailers in five of Africa’s largest markets: Nigeria, Egypt, Kenya, Morocco and South Africa, shows that the retail sector Traditional retail will remain at the heart of African commerce in almost every country. , such as South Africa, and that there is strong momentum for change in the traditional retail experience.
“Traditional retailers’ drive to diversify and embrace digital solutions, coupled with growing investor interest in providing digital solutions, shows that they will find growth opportunities and remain cornerstones of African economies going forward. future,” said Stefano Niavas, managing partner. at BCG Nigeria, and co-author of the report.
The report notes that modern retail remains highly fragmented and driven by international hypermarket brands. Modern chains struggle to grow due to currency devaluation, underdeveloped and inefficient transport infrastructure, poor logistics capabilities, inadequate power supply and other complex challenges.
More importantly, merchant digital maturity is also significantly above the national average.
The level of financial inclusion varies widely across the region and generally matches that of the general population.
While 85% of Kenyan store managers have a bank account, only 40% of their Nigerian counterparts do. A large number of African retailers also said they feel under pressure from modern retailers. In response to these challenges, brick-and-mortar stores are branching out far beyond basic necessities, such as fresh and packaged foods and household cleaning and personal care products.
Many small retailers now sell telecommunications products, such as prepaid cards and SIM cards. Several digital technology providers are tackling inefficient distribution systems that often force retailers to close their stores for hours in order to buy goods from wholesalers.
Nigerian B2B digital marketplace Alerzo, for example, enables more than 100,000 users – 90% of whom are women – to buy inventory directly from manufacturers, receive and make cashless payments and better track their income.
Digital marketplace in Nigeria such as Alerzo also facilitates a portfolio of digital services, including airtime purchases, bill payments and peer-to-peer transfers. In the long term, these platforms aim to provide great apps with a wide selection of services. This would allow them to fully digitize traditional retailers and integrate them into the formal economy.
Startups also provide working capital and financial management systems to help traditional retailers grow and run their businesses more efficiently; however, they must compensate for a lack of awareness and training among retailers.
The study revealed that traditional retailers will continue to dominate. But to thrive, they must modernize by offering new services and taking advantage of the opportunities offered by digital solutions. Niavas added, “Based on our analysis, many small retailers are already aware of the changing retail landscape and are ready to improve their business premises, product quality and expand across the country”.
The report states that based on current trends, the modern retail sector in Nigeria, even if growing rapidly, is likely to remain small and perhaps account for no more than 5% of Nigeria’s retail sales. by 2030, adding that due to structural problems in Nigeria, foreign investors are likely to remain reluctant to enter the market.
According to the report, “Given the central role that brick-and-mortar stores will continue to play in Africa’s retail landscape, there will be a number of opportunities for different players in the ecosystem as the environment is changing. Investment funds can find opportunities to provide capital and management expertise that will enable modern local retail chains to expand into new cities.
“An active start-up ecosystem wants to provide digital solutions that will strengthen the role of traditional retail in Africa and allow the sector to become the interface of commerce across the continent.
“Digital solutions can help consumer food manufacturers improve their control over go-to-market strategies and provide data to better understand retailers. Banks and telecom providers can drive growth by developing new business models and offerings tailored to the needs of traditional merchants.