Retailers eye Africa as frontier for growth

Retailers eye Africa as frontier for growth

Consultants Deloitte and Planet Retail on Tuesday identified five African countries -Algeria, Kenya, Morocco, Nigeria and South Africa - as being among the 10 new markets most likely to appeal to multinational store groups in the coming years.

In an observation made in a report published on the second day of the World Retail Congress in Berlin, Africa was said to appear as an alternative location for western retailers, who are looking for the next growth opportunity in emerging markets.

Africa in the spotlight

According to the company:"All have fast-growing economies, young and growing populations, and fragmented retail sectors; Moreover, although traditional forms of retailing are still dominant, a growing middle class is demanding branded products and the opportunity to shop in modern retail formats", they said.

Africa was thrust into the retail limelight this year when US retail giant Wal-Mart bought a majority stake in South Africa's Massmart, giving it a foothold in the continent's biggest economy and a presence in some 13 other African markets, ranging from Botswana to Zambia.

"With the world's largest retailer now active in the continent it seems likely other leading global retailers will investigate opportunities in the region”, said Deloitte's director of global research, Ira Kalish.

Alternative markets

Faced with limited population growth and sluggish economies at home, many US and particularly European retailers have been expanding into emerging markets in the hope of finding growth opportunities but with competition intense in China and Brazil many are looking elsewhere to gain an advantage.

This year, for example, Belgium's Delhaize bought Serbian retailer Delta Maxi Group, while Germany's Metro is expanding in Pakistan, two countries also tipped in the report as likely to attract more attention among international chains in the coming years.

As most Africans are on low incomes and focused on basic needs, grocers such as France's Carrefour and Auchan and Britain's Tesco are set to be the first movers.
Other brands, particularly those focused on clothing and footwear could quickly follow.

Long-term Investment

"Africa is the final frontier in retailing", said John Fraser, an executive at South African store group Woolworths, which this month outlined plans to more than double its presence in Africa over three years.

He cautioned it was a long-term investment, though, and with few strong local players in many countries, new entrants might have to seek partners from outside the sector, meaning it would take longer to establish themselves.

While a weak banking infrastructure may deter some retailers from Africa, it could be an opportunity for those prepared to offer their own financial services, which can boost customer loyalty and give an advantage over rivals when it comes to larger purchases, he added.

Reuters/Ehimen/Ekata