by Craig Page-Lee (@cpl_ignite) It was with much anticipation that I recently boarded my flight to Dubai, neither because it was a cheap alternative to some global destination — as is the frequent offer by Emirates Airlines — nor because I was wanting to indulge in a shopping spree there (the value of the ZAR against other leading currencies being the determining factor here).
Irrespectively, I had many expectations as there’s been a lot published about the magnificence of the entire Emirates Airline traveller experience, from the comfort of the plane itself to the great service and on-board experience.
Not the case
Sadly, this wasn’t the case on this particular trip, especially as there was no ‘goodie bag’ containing the obligatory fold-up toothbrush and minute tube of toothpaste – everyday items that are part of our lives and that I’ve received, and used, on just about every other long-haul international flight I’ve ever been on.
This made me think about where I would’ve gone at my end destination to buy said items, had I actually forgotten to pack them into my travel bag, or forgotten my wet-pack at home in its entirety.
We all have a reliance upon, and a relationship with, grocery retail brands in South Africa, and I have become curious as to where else on the continent these various organisations have migrated and “set up shop”.
Interesting research results
My readings into this topic have yielded interesting results, making me realise that, without too much effort, I will soon find a branch of Shoprite (OK Franchise Division — OKFD), Pick n Pay, Truworths, Woolworths, Pep, Game and Mr Price somewhere else in Africa to serve my needs.
As noted in my previous columns, the sub-Saharan African region is where many South African companies have already expanded into, or are in the process of doing so, in the quest for long-term growth prospects as the SA economy continues to contract at a rapid rate and the market remains stagnant.
Political and economic challenges will remain embedded as part of our daily lives in SA, so to achieve continued shareholder return, one has to look north of the borders. It is, however, not an easy journey, for there are many technical, legal and operational challenges to overcome and there are highly competitive markets which, to a large degree, are still defined as “informal”.
Traditional, ‘informal’ retail options still dominate the landscape, even among the growing middle class. About 90 percent of commerce in Africa occurs at these informal retailers, including small independent stores, kiosks, and non-organized open-air markets. Formal retail—such as malls, shopping centers, and other defined retail spaces—remains in the nascent stages in most Sub-Saharan Africa countries, limited primarily to a handful of urban areas. However, the low rates of formal retail coupled with increasing urbanization and the relative stability of many African economies demonstrates massive room for growth. For example, Nigeria, with its formidable and growing middle class, had only two shopping malls in 2012, compared to more than 200 in South Africa. As a result, domestic, regional, and international retailers are taking notice and increasing investment.” (Reference: AT Kearney — The 2014 African Retail Development Index™ Seizing Africa’s Retail Opportunities.)
Shoprite in Africa
SA retailers have achieved some great success on the continent and, most interesting to note, is that it’s Shoprite that’s had interest the longest, out of all the retailers mentioned, having expanded into 17 sub-Saharan countries as early as 1995, with over 169 stores and with plans to open a further 30 stores by June 2015. Surely this has made Shoprite SA’s best and most-experienced retailer in Africa?
Mr. Price, which targets the low- to mid-market consumer, has expanded into Ghana in West Africa; Pep Stores, which targets the low-end clothing market, has expanded into Nigeria; Spar has successfully expanded into a number of markets, including Nigeria; and Truworths, TFG, Shoprite, Game and Mr Price all have a presence in Ghana. Pick n Pay will also expand into Ghana, too, in 2015. Meanwhile, Woolworth has pulled out of Nigeria because its “mix” didn’t really work.
I do wonder if we will see international retailers such as Gap, Zara and Topshop use their SA establishments to springboard further into the continent, if at all — maybe there are a few good learnings from Woolworths in this regard.
Of interest, too, is that a great deal of the expansion across Africa has only been possible through the establishment of franchise agreements, as language (particularly with English-speaking countries trying to do business in francophone Africa), legal issues and local regulation regarding foreign ownership are stringent and not sympathetic to foreign companies, and operational and set-up costs are prohibitively expensive. That said, certain joint-venture structures have also been established with “in country” part-ownership.
Important to reiterate
Also important to reiterate is that Africa is a highly complex and competitive environment, and that not all “paths to purchase” lead to the till point for SA retailers. As much as Walmart’s acquisition of South African grocery chain Massmart (Walmart — the world’s number one retailer acquired 51% of Massmart for about $2.4 billion) presented the former with an opportunity to roll-out onto the continent, neither Massmart nor Shoprite have managed to develop a presence in French-speaking West Africa — a key market on the continent.
Carrefour, the world’s no.2 retailer — which operates a similar mix of store formats to that of Shoprite Holdings Ltd, with a mix of hypermarkets, supermarkets and convenience stores — has indicated that it will enter the West and Central African countries of Côte d’Ivoire, Senegal, Ghana, Nigeria, Cameroon, Congo, Gabon and the DRC.
This may not be a threat at this stage, with SA retailers not operating in French-speaking West Africa — as noted above — but may pose a huge threat to the broader region once Carrefour has laid a strong foundation in the region and begins expanding into other non-French speaking countries.
Closer to home, some Kenyan supermarket chains, including Nakumatt and Uchumi, have also expanded outside of their home market and could well be competing with retailers such as Walmart, Shoprite, PnP and Spar in a short space of time.
Window has closed
The window of opportunity for SA retailers has closed, and the race for consumer share-of-mind and spend commitment at the till point continues at an increased pace.
While I now do know that I should be able to find a branch or store of my favourite SA retailer elsewhere on the continent, it’s important to note that it’s not a one-size-fits-all approach to retail expansion. Shopping models in SA cannot be literally transferred to other countries without an in-depth understanding of regulatory controls within that market, challenges associated with the supply-and-demand side of the respective retail category in question, consumer segments and needs states, available communications channels, and the media-owner structures that are in place.
SA retailers which align with the right media and advertising agency groups operating elsewhere in Africa will also go a long way to ensure access to meaningful and relevant insights, and for successful campaign rollouts of expanding SA brands.
Are the agency groups’ Pan-African structures and offerings well-developed enough to address the highly differentiated communication needs for retailers in Africa, or are they also still at an “informal” level — as with the majority of retail operations on the continent — operating out of silos and jostling for positions of relevance?
Perhaps there’s an opportunity
In closing, and going back to my opening paragraph, maybe there’s an opportunity for Shoprite or PnP to develop cost-effective ‘goodie bags’ for economy-class passengers on the airline in question…
Craig Page-Lee (@cpl_ignite) is the group managing director of Posterscope South Africa. He has over 21 years of working experience across the disciplines of architecture and retail design/brand communications and marketing management/advertising and media, across 11 pan-European and six pan-African regions. Craig’s monthly column on MarkLives, “Beyond Borders”, focuses on doing business in various African markets. Don’t forget to tune into his #eBizRetail slot on www.ebizradio.com.
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