Africa’s many traditional retailers are digitising and modernising
By our News Team | 2022
Modern technology is bringing important and far-reaching changes to the ‘mom-and-pop’ retail sector across the continent.
The humble mom-and-pop shop, more formally known as a ‘traditional’ (as opposed to ‘modern’) retailer, has been getting a lot of attention in Africa of late. It seems like not a month goes by without another announcement of a technology start-up or big tech giant looking to partner with, or target, this vibrant sector.
What was previously viewed as a relic of a disorganised and unstructured retail past is now, ironically, being seen as a massive business opportunity by many, says emerging markets supply chain expert Tielman Nieuwoudt.
Traditional retailers in Bahir Dar, Ethiopia. Photo credit: Adam Jones via Wikimedia Commons
In African markets – whether you are in Lagos, Nairobi, Cairo or Casablanca – traditional retailers remain a big part of your shopping experience and the numerous traditional trade outlets endure as the biggest segment in most retail markets on the continent.
According to Nieuwoudt, emerging market supply chains have numerous intermediaries and the market, as it stands now, is prime for disruption.
“Supply chains are long and there are numerous middlemen driving up prices. In many African countries, traditional retailers are typically in contact with a handful of suppliers per category. There is little price visibility in the market and shops are often unsure if they pay a fair price for a product, or not,” he writes in the latest issue of Strategic Marketing for Africa, the magazine of the African Marketing Confederation.
Small retailers are often stuck in a credit trap
Traditional traders frequently make use of intermediaries, such as wholesalers, to ‘break bulk’ into smaller, more affordable, quantities and to provide credit when required. Smaller quantities are better for preserving cash flow, but the local retailer normally ends up paying higher prices per item because there is no economy of scale. They are also often stuck in a credit-trap with one or two wholesale partners – making shopping around for the best deals difficult.
Working with numerous players in a long supply chain that stores, handles and transports goods also creates wastage and additional cost in the system. Often farmers and suppliers transport fresh produce without boxes and with limited or no refrigeration. Products are therefore exposed to the elements and quality suffers due to increased handling and limited cold-chain storage.
However, changes are taking place in traditional trade in many countries, with the pandemic accelerating the adoption of e-commerce and digital retail services in these markets. BCG found that in Kenya, for example, the portion of retailers offering remote ordering rose from 27% in early 2019 to 39% in late 2021. As the informal retail sector is adopting more technology solutions, tech companies can play an important role in digitising traditional retailers — especially in big urban centres.
Nieuwoudt says the explosion of mobile technology and internet-enabled smartphones is at the root of the shift to digitisation.
For more on the increasing digitisation of traditional retailers, go to pg 36 of the latest issue (Issue 3 2022) of Strategic Marketing for Africa, the magazine of the African Marketing Confederation. You can access the Digital Edition here. Print Edition copies are available via the various national member associations of the AMC.