SMALL RETAILERS ACCOUNT FOR 97% OF RETAIL SALES ACROSS AFRICA

A report from the Boston Consulting Group found that despite the many challenges traditional retail face in Africa, including the expansion of modern retail, the nascent rise of e-commerce, and changes in consumer behaviour that were accelerated by the COVID-19 pandemic, small shops and open-air markets dominate the African retail market.

The report, ‘The Future of Traditional Retail in Africa’, revealed that despite the advance in supermarkets, convenience stores, and other modern formats, African consumers on average continue to buy more than 70 per cent of their food, beverages, and personal care products from the continent’s more than 2.5 million small, independent shops.

In BCG’s study of more than 4,500 small retailers in five of the biggest African markets: Egypt, Kenya, Morocco, Nigeria, and South Africa, it has become evident that the traditional retail sector will remain at the core of African commerce in all but a handful of nations, such as South Africa, and that there is strong momentum for change in the traditional retail experience.

The managing partner in BCG Nigeria, and co-author of the report, Stefano Niavas said: “the willingness of traditional retailers to diversify, and embrace digital solutions coupled with the growing interest of investors to provide digital solutions show they will find opportunities to grow and remain the cornerstones of African economies in the future.”

According to the report, based on current trends, the modern retail sector is growing fast but is likely to remain small, and still may not account for more than five per cent of retail sales by 2030. “Modern chains are struggling to expand due to currency devaluation, underdeveloped and inefficient transportation infrastructure, poor logistics capabilities, inadequate electrical power and other complex challenges.”

Niavas added, “based on our analysis, many small retailers are already aware of the evolving retail landscape and are ready to improve their business premises, quality of products and expand across the country.”

He also noted that given the central role that traditional shops will continue to play in Africa’s retail landscape, there will be a number of opportunities for various players in the ecosystem as the environment evolves, saying, investment funds can find opportunities to provide capital and management expertise that will enable local modern retail chains to scale up in new cities.

“An active start-up ecosystem is interested in providing digital solutions that will solidify the role of traditional retail in Africa and enable the sector to become the commercial interface across the continent.

“Digital solutions can help manufacturers of fast-moving consumer foods improve their control over go-to-market strategies and provide data to better understand retailers. Banks and telecom providers can achieve growth by developing new business models and offers that are adapted to traditional retailers’ needs,” he said.