Africa Consumer Business

Trends and characteristics of the African retail market

African Powers of Retailing

The retail industry in Africa, characterised by new windows of opportunity, is causing some of Africa’s retailers to pursue new growth opportunities within the continent. Botswana-based Choppies Enterprises, for example, has focused on acquisitions in Kenya and Tanzania to establish a presence; The Foschini Group has a target of opening 280 to 300 stores outside of South Africa, primarily in Mozambique, Angola and Kenya by 2018; and Woolworths Holdings acquired 33 franchise stores in Botswana, Namibia, Swaziland and Ghana in FY13[1].

International retailers have also seized the business opportunities within the continent, with international investors like Actis buying up stakes in African retailers like Coricroft, Tekkie Town and more recently, Food Lovers Market[2].

In recent times, the sector has also shown its resilience, with Statistics SA reporting that South African retail sales came in better than expected in December 2015, increasing by 4.1% compared with a year ago after rising by 3.8% in November[3]. This is despite a tough global economic climate, coupled with South Africa’s own well-documented economic challenges.

The industry and market analyses from our Deloitte African Powers of Retailing report reveal even more about this sector, providing insight into what drives it, what makes it unique, and which opportunities exist to drive future growth on the continent.

Noteworthy characteristics of the African retail market

Given the promising nature of this sector on the continent, what are some of the characteristics one needs to note when exploring business opportunities on the African continent?

African Powers of Retailing 2015_Trends Twitter card

Figure 1: Source – Deloitte African Powers of Retailing report

  1. 90% of transactions occur through informal channels – This could signal an opportune gap for the increased establishment of formal retail presence to capture larger portions of this market share. However, hurdles do exist, including low levels of established distribution networks, and political and economic uncertainties.
  1. Grocery retailing drives the industry – Approximately 64.8% of total retail sales across the continent in 2013 were accounted for by food retail sales.
  1. Forecourt retailing is growing – Forecourt retailers are expected to record continued growth as a number of new petrol stations open throughout Southern Africa. Even further North, Delight! and Bonjour are both retail offerings from the oil and gas players Sasol and Total Nigeria.
  1. International retailers are entering Africa despite the challenges – International retailers eager to establish a footprint on the African continent have tended to enter via South Africa; historically due to the more mature market and access to a purchasing population.
  1. South African retailers look to expanding outside the continent – Retailers such as The Foschini Group (TFG), Shoprite Holdings and The SPAR Group are targeting expansion beyond South Africa, looking as far as Europe and Asia Pacific; looking to expand into areas that show recovery and provide access to an established consumer base.
  1. Internet retailing is growing – Internet retailing or eCommerce (desktop and mobile), is emerging as the most dynamic channel within Africa’s retailing market. Although it accounted for only a small share of total retail sales in South Africa at 0.59% in 2014, the market is seeing a positive growth rate.

What does this all mean for you, and how can you prepare and strategise for entry into and expansion across different African markets, given the numerous nuances, opportunities and challenges? Our Africa Consumer Business Chief of Staff, Dylan Piatti is available for further discussions. You can also get more information about retail in Africa by downloading our African Powers of Retailing report.

 

[1] Deloitte African Powers of Retailing, 2015

[2] IOL, 2016

[3] Statistics SA, 2016

About the author

Deloitte South Africa

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