a The Africa Annual feature. Both Woolworths and Shoprite have announced plans this year for expanding into Africa. Jon Pienaar looks at where they’re going.

Woolworths, despite its USD 2 billion acquisition of David Jones in Australia, is planning to add 15 more stores to its presence in Africa over the next 3 years. The retail giant, whose watchword is ‘quality,’ already runs 65 stores across the continent.

retailThe only thing preventing the company from opening more stores, according to Woolworths head of international operations, Paula Disberry, is a lack of suitable premises. She told attendees at the recent Reuters Africa Investment Summit in Johannesburg, “The biggest challenge we see is finding good shopping malls. I’d love to have 650 stores rather than 65 stores but the locations simply don’t exist and that’s our biggest inhibitor.”

But Woolworths is learning tough lessons about markets outside of SA. In November last year the retailer pulled out of Nigeria, citing high costs of rental, lack of utilities, marketing and supply chain issues, and high import duties. Local competitors in that region, DealDey, suggest that Woolies may have been pricing too high. Sanaz Etebarian, the CEO of DealDey told CNBC Africa that he believed that Nigerian middle class consumers were more price-conscious than brand-conscious compared to their SA counterparts.

For the newest round of expansions, Woolworths says it will be looking to Kenya, Mauritius and Namibia. Hopefully the lessons learned from the Nigerian experience will stand the brand in good stead.

Shoprite already has 150 stores in 16 African countries outside of South Africa, and it has unveiled plans for 13 new outlets in sub-Saharan Africa in the next year.

Whitey Basson says that while Shoprite saw mediocre performance domestically last year, sales had surged in the rest of Africa by some 28.1% in Rand terms.

But South African retailers need to watch their backs: international retailers are already investigating the opportunities of Africa’s burgeoning market. The obvious example is Walmart, which bought SA retailer Massmart in 2011, and says it plans to open 90 stores across Africa over the next 3 years.

A study by global strategy consultancy firm, AT Kearney, has resulted in the creation of the African Retail Development Index (ARDI,) which ranks the top ten countries in Sub-Saharan Africa for potential retail expansion.

The ARDI is based on four elements for ranking the potential for moving into each country:

  • Market size
  • Market saturation
  • Country risk
  • Time pressure

The study also segments the market according to recommended approaches. According to these criteria, Rwanda shows the most potential, but it is noted that the market demonstrates ‘low maturity,’ hence the recommendation to ‘start with the basics.’

retail2 quotes Bart van Dijk, AT Kearney partner and ARDI co-author as saying, “There are wide differences in infrastructure and supply chain development across African countries. Understanding the opportunities and limitations from country to country is a critical element of the retail expansion decision.”

As Africa becomes more wealthy and urbanised, and western, ‘First World’ markets become saturated and more competitive, the opportunity for retailers is obvious. “Although there are many challenges, Africa has reached a point in its economic development where global retailers must evaluate the significant potential for growth in this market,” says A.T. Kearney partner and ARDI co-author Mike Moriarty.

africa annual

This feature first ran in The Africa Annual published by Ornico with as its official media partner. Read or download the full magazine via Issuu.

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