Retail sales in Nigeria continue to grow strongly and faster than GDP
The retailing sector in Nigeria continues to expand, with value sales increasing strongly in 2013 and faster than real GDP. Growth is being fuelled by the increase in the size of the Nigerian population (particularly in urban areas), increasing disposable incomes among some segments of the population, and the drive by some retailers to ‘modernise’ retailing. Apart from store-based retailing, non-store retailing is also growing strongly (although this remains a very small segment) due to increased access to the internet, government policies encouraging ‘cashless’ shopping, and the marketing activities of some internet retailers.
Modern retailing growing strongly and starting to replace traditional retailing
The modern retail area is growing, particularly due to investments by international retailers as well as government policies discouraging open air street retailing. From being largely focused in open spaces, with a bargaining culture determining prices, retailing in Nigeria continues to become more formal and modern. The expansion of international retailers has also had an effect on small neighbourhood stores, which have adapted to consumer tastes to change the profile of the products they offer as well as the layout and design of their stores. Furthermore, the lifting of the ban on the importation of textiles and furniture at the end of 2010 is encouraging such retailing in the apparel specialist retailing channel as opposed to informal channels, where second hand clothes and cheap, but illegally imported, clothes are sold.
Grocery retailers increase stock of non-grocery items
In trying to match new modern retailers, traditional grocery retailers such as independent small grocers have increased the stock and range of the non-grocery items they offer. This is the result of several factors, notably the increased purchasing power of the average Nigerian as a result of economic growth in recent years, particularly in areas such as banking and telecommunications – a development which has resulted in the growth of the middle class. In addition to groceries, grocery retailers also sell items such as clothes and footwear, consumer electronics and appliances, books, toys, personal and home care products, as well as household furniture and furnishings.
New international players continue to enter fragmented area
The Nigerian retailing sector is still dominated by traditional channels such as open markets, where all sorts of items are sold, from food and clothes to electronics and phones. The area thus remains quite fragmented, with no major concerns holding strong shares. However, the increased presence of international chains such as Retail Supermarket Nigeria Limited’s Shoprite and Artee Industries Ltd’s Spar is changing the environment slowly. In apparel specialist retailing, there has been a surge in activity following the lifting of the import ban on textiles, with 2012 and 2013 seeing new big entrants such as Mr Price, Woolworths, Hugo Boss and Pep.
Strong forecast growth in store-based and non-store retailing expected
Over the forecast period, the Nigerian retail industry should continue to see strong and sustained value sales growth. Population growth, particularly amongst young people in urban areas, rising incomes, and the shift from traditional to modern channels will help to fuel this growth. The supermarkets and hypermarkets channels should be among the fastest growing due to the fact a large number of new outlets are expected to be opened. In terms of non-store retailing, internet retailing is expected to see strong growth as the number of internet-capable devices is increasing and safety fears are being eased through the availability of trusted internet retailers (eg efforts of Konga and Jumia to improve reputation in 2013).
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