Is Africa The New Dominant Retail Market?
Despite the recent warnings from the World Bank that the Ebola virus could create an “economic catastrophe” in the coming months across the African continent, most business analysts, economists and retailers are holding out hope that countries will weather the storm and come out stronger than ever.
In the past decade, the economy of many African nations have experienced dramatic growth, much in part to governments’ adoption of capitalism, free markets and a limited role of the state in various industries. With advancements in technology and a desire to achieve the dream of being middle class, the entrepreneurial spirit has inflicted a substantial number of people, and thus creating new business opportunities.
Whether it’s the influx of conventional mom and pop shops or the arrival of multi-national, big box corporations, like Walmart and Carrefour, Africa is achieving something that it hadn’t had prior to the new millennium: a retail marketplace. Due to a growing middle class, rising gross domestic product and higher disposable incomes, the prospects are endless.
According to a report by African-focused Rand Merchant Bank (RMB), Nigeria tops African retail investment, and is beating out Egypt, Ethiopia, Democratic Republic of Congo and Libya who came second, third, fourth and fifth respectively on the RMB retail index. Although South Africa remains one of the biggest and most consistent economies in the continent, it was 15th for overall retail investment – retail sales were up 2.4 percent year-on-year in July.
“Those are probably the most favorable prospects for retail investors, but they aren’t the only markets available,” said Nema Ramkhelawan-Bhana, an Africa analyst at RMB, in an interview with Money Web. “In the next few years, you could see that changing as your income dynamics change.”
The most interesting aspect to Africa’s retail environment is the variety of platforms. Egypt, Nigeria, Ghana, Kenya and Morocco have all utilized the powers of e-commerce, mobile commerce and traditional brick-and-mortar establishments. This is adaptation is paying off big time.
Konga is one illustration of online retail flourishing in Africa. Known as the largest online mall in the region, Konga is a company that sells a variety of goods, including electronics, fashion and household appliances, and offers customers free shipping and cash on delivery.
Jumia is believed to be the Amazon, Overstock or Ali Baba (without the immense initial public offering) of Africa. Located in Egypt, Jumia sells an assortment of items: from fashion to books, from shoes to computers. It has been gaining significant attention all over the world after being featured by an array of mainstream publications.
These companies are just some of the examples of how African entrepreneurs are starting from the ground up without any seed money from the likes of major MNCs, though some food retailers are partnering up with foreign entities and investors, reports Think Africa Press (TAP).
On that note, food is another big business in Africa. The newspaper writes that if more established brands like Walmart continue to expand across the continent then local production will be eliminated and foreign items will be stocked on the shelves.
“The power that retailers could exercise over their suppliers could be equally problematic,” wrote Lauren Sneyd of TAP. “Insisting producers apply universal quality standards could make local businesses unviable. And if at the same time, big retailers used their control over consumer choice to push their customers to buy cheap foreign snacks, the diversity of diets and food cultures could suffer.”
Although Africa is embracing the retail industry after years of having relatively no supplies, there will be some unintended consequences for the various nations. Of course, the question then must be asked: would African consumers prefer no choice at all or an abundance of choice?
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.