The rise of modern retailing drives overall growth in retailing
The Nigerian retailing industry has become steadily more organised in recent years. This is has been partly driven by the efforts of some state governments to ban street trading, revitalise city centres and modernise trading standards and partly due to the efforts of some international retailers and investors to tap into the desires of a growing and young population for convenient, stress-free retailing. The growth of modern retailing continues to contribute to strong overall growth in retailing as more formal retailing means less tax avoidance and a stronger likelihood that products will be genuine rather than cheap imitations. Growth in retailing thus outpaced Nigeria’s GDP growth in 2014 as well as over the entire review period. The growth being recorded in modern retailing is, however, unlikely to lead to the complete disappearance of informal retailing. Three trading platforms still co-exist side-by-side in Nigeria: traditional open markets and street traders; semi-formal modernised open markets; and Western-style shopping centres and formal retail outlets.
Nigeria’s internet retailing boom has begun to emerge
A new retailing channel became significant enough to matter in Nigeria for the first time in 2014: internet retailing. This channel has recorded immense growth since 2012, with particularly strong growth recorded during 2014 as the impact of the investment in internet retailing by Konga and Jumia, two new online retail brands, bore fruit. Furthermore, several new small players including supermart.ng, addiba.com, webmall.ng, buyam.com.ng, and drinks.ng rode on the success of these two giants. Internet retailing maintains a particularly attractive unique selling point in Nigeria: the growing urban population is more internet conscious and more likely to prefer internet retailing to store-based retailing due to the severe traffic congestion in Nigeria’s major cities, which makes home delivery a very attractive option. Nevertheless, internet retailing is likely to continue accounting for a very small proportion of overall retailing value sales for the foreseeable future as the majority of Nigerians still prefer traditional modes of shopping including haggling and the hustle and bustle of open markets and it is likely to take considerable amount of time to convince them to change deeply ingrained habits.
Grocery retailers increase their stock of non-grocery items
In recent years, Nigeria’s traditional grocery retailers have increased the range of non-grocery items they offer. This is the result of several factors, notably the increased purchasing power of some middle-income and high-income Nigerians, particularly those working in buoyant services industries such as banking and telecommunications. This is the main reason for the re-emergence of a middle class which demands more than the usual grocery items. In addition to groceries, many grocery retailers now also sell items such as apparel and footwear, consumer electronics, consumer appliances, books, toys and games, beauty and personal care products and home care products as well as homewares, furniture and furnishings.
International players continue to expand, although local brands remain key players
During 2013 and 2014, Retail Supermarkets Nigeria Ltd opened eight more Shoprite stores, whilst Artee Industries Ltd opened three new Spar stores in Nigeria over the same period. Furthermore, following the acquisition of Game’s Massmart Holding Ltd by Walmart Inc, the company has begun its own expansion, opening new Game stores but, more significantly, creating a new brand called Valumart in convenience stores, a move which represents a bold move away from the large-format outlets which international chains have traditionally used when entering modern grocery retailers in Nigeria. In fact, the path to smaller outlets was paved by local player Addide Ltd, which some time ago recognised the strong potential for small grocery retailers outlets in densely populated urban areas. Apparel and footwear specialist retailers has also begun to see some consolidation following the exit of Woolworths as Mr Price Apparel has assumed leadership in the channel.
Retailing expected to register a positive performance over the forecast period
Nigeria’s large and growing urban population is set to provide steady and ever-growing demand for retailing during the forecast period. In addition, the anticipated entry and expansion of international retailers is set to continue driving growth in the industry over the forecast period. Many companies are expected to strive to develop new ways to win over sceptical, conventional Nigerians to more convenient shopping formats in which profit margins are higher, bearing in mind that, despite the positive GDP growth, the majority of the Nigerian population maintain low levels of discretionary spending, a situation which could deteriorate in the future due to the oil price slump and the devaluation of the Nigerian naira. Finally, as the vast majority of high-income Nigerians are concentrated in handful of key urban areas, developments in retailing can be expected to focus on these areas during the forecast period.
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