As more retailers dip their toes into Africa, Retail Week takes a look at the opportunities and challenges retailers face in the continent.
Why we talking about it now?
Poundstretcher opened a second store in Zambia last week and is understood to be plotting a further two. Retail Week reported this week that the African business is understood to be operated separately from the UK business with Zunaid Aziz, the nephew of Poundstretcher UK chairman Aziz Tayub, running the business. Sources indicated that Zunaid Aziz plans to “aggressively expand” in the region, although a Poundstretcher UK spokeswoman declined to comment. Poundstretcher also operates three stores in Malawi after it launched there last year.
Which retailers are already in Africa?
Retailers are most likely to dip their toes into the vast continent by opening stores in English-speaking South Africa. Topshop and Topman made their South African debut in late 2012 with stores in Johannesburg and concessions in department store Edgars. Zara also has a presence in the country while in the food sector, Walmart moved into the market with its $4.2bn acquisition of general merchandise group Massmart in 2011. Others have their eye on the market - Australian jewellery and accessories retailer Colette said last year that it plans to open 40 stores in South Africa through franchise partners while Phase Eight plans to open stores there this year.
What are the opportunities in the African market?
While South Africa is the key market of choice, says Planet Retail analyst Tatjana Wolff, there could be opportunities in Nigeria and Kenya. “Nigeria mainly because of its huge population, and Kenya as the country is one of the most important trading hubs in east Africa and features a relatively mature economy, which has a positive effect on consumer spending.”
She says that as more Nigerians are travelling across Western countries and becoming more brand aware, this could bring opportunities for non-food retailers looking to tap into this desire for European and US goods.
What are the challenges to entering Africa?
The key barriers to entry across Africa are insufficient infrastructure and red tape, says Wolff. She adds: “For example, if you want to ship food from South Africa to Angola, Ghana or Nigeria via the sea and at the harbour there is a strike or you first have to bribe the workers over there, this costs not only money but also very valuable time and can lead to the fact that your products can perish very easily. Same problem for trucks on the roads, if these are not maintained well.”