Despite the growth of modern retail, the informal retail channel continues to reflect the typical shopping experience of a large proportion of consumers across all income groups in Sub-Saharan Africa and will continue to do so in the future. The report will provide insight into this retailing landscape, looking at consumer purchasing and payment habits and at how the informal market plays a crucial role in any route-to-market strategy.
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The diverse frontier markets of sub-Saharan Africa present opportunities across a broad range of industries and product categories. The region's growing middle-income and sizeable low-income populations create numerous and diverse investment opportunities for forward-thinking investors. In addition, the low penetration of modern retail suggests significant investment and business opportunities, even more so when rapid urbanisation and rising household incomes are considered. As a result, consumer market growth prospects are expected to create opportunities for retailers and consumer-orientated businesses alike.
Despite the growth of modern channels, informal retail channels reflect the typical shopping habits of many sub-Saharan African consumers across all income groups. Informal channels developed as a result of the history, traditions and trading preferences of consumers in the region. Additionally, this channel has adapted to local consumers' purchasing habits, purchasing power and product preferences. Understanding how informal retailing channels operate can aid in developing a regional channel distribution strategy. In addition, understanding how and where a product is consumed, as well as the various types of informal traders and their specialities, enables the development of more targeted product offerings, which is necessary for developing an effective regional route-to-market strategy.
Affordability remains a critical competitive advantage in the region. The final link in the supply chain, which is frequently fragmented and complex, determines the price. Within the informal retailing market, price competitiveness is achieved by repackaging products in portions that meet the demands of consumers with limited disposable income. Additionally, bargaining power, credit-based payment flexibility, trust, loyalty, credit sales, and proximity to consumers all contribute to the attractiveness of informal markets. Companies entering the region are increasingly offering value for money basic formats. Therefore, businesses must adapt their product portfolios and distribution strategies to capitalise on these new channels of opportunity or devise innovative alternatives.
E-commerce is thriving in the region as a result of investments in innovative digital business models that address specific customer needs in both formal and informal environments. Digitalisation is enabling businesses and consumers in sub-Saharan Africa to access new retail and payment opportunities as a result of improved internet connectivity and rising penetration of mobile phones. Mobile technology is particularly transforming the region's delivery of essential services. As a result, tools that aid informal retailers in growing their businesses, such as integrating new digital services with established distribution networks, are required.
Innovative distribution models are critical for reaching and promoting new products to sub-Saharan African consumers, particularly those at the bottom of the pyramid (BOP). Partnerships with established local partners which are connected throughout the value chain can also be a cost-effective way to expand market presence. When combined with adaptive supply chain and logistics strategies, this can assist businesses in overcoming distribution challenges.
Sales of new and used goods to the general public for personal or household consumption. Excludes specialist retailers of motor vehicles, motorcycles, vehicle parts, fuel. Also excludes foodservice, rental and hire and wholesale industries (Cash and Carry). Sales value excluding or including VAT/Sales Tax. Retailing is the aggregation of Store-based retailing and Non-store retailing. Retailing excludes the informal retail sector. Informal retailing is retail trade which is not declared to the tax authorities. Informal retailing encompasses (a) sales generated by unregistered and unlicensed retailers, ie retailers operating illegally, and (b) any proportion of sales generated by a registered and licensed retailer which is not declared to the tax authorities. Unregistered and unlicensed retailers operate predominantly (although not exclusively) as street hawkers or operate open market stalls, as these channels are harder for the authorities to monitor than permanent outlets. Activities in the illegal market, which is usually understood to refer to trade in illegal, counterfeit or stolen merchandise, are included within our definition of informal retailing. Activities in the “grey market”, which is usually understood to refer to trade in legal merchandise that is sold through unauthorized channels – for example cigarettes bought legally in another country, legally imported, but sold at lower prices than in authorized channels – will be included as informal retailing if no tax is paid on sale by the retailer. However if the retailer pays tax – for example on cigarettes bought legally in another country but sold at a lower price than standard – the sale is included within formal retailing. In relation to click and collect purchases (i.e. where purchases are made over the internet but picked up at store) where the sales data is attributed depends on where the payment is made: If payment is made in store, then the sale is included in store-based sales. If payment is made over the internet, then the sale is included in internet retailing.See All of Our Definitions
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