RETAILING

Traditional outlets will continue to dominate retail in Africa

By our News Team | 2022

The continent’s small independent shops are modernising and embracing tech – ensuring they’ll remain dominant for the foreseeable future.

Millions of small, independent shops are the cornerstones of African commerce. Now they’re diversifying, digitising, and partnering with modern retailers to reach the next level.

A new study by the Boston Consulting Group (BCG) of more than 4,500 small retailers in five of the biggest African markets – Egypt, Kenya, Morocco, Nigeria and South Africa – concludes that the traditional retail sector will remain at the core of African commerce in all but a handful of nations, such as South Africa, for the foreseeable future. But there is strong momentum for change in the traditional retail experience.

Retailing

Photo via Wikimedia Commons

BCG’s research revealed several factors driving this transformation. One is the profile of African shop proprietors, who are typically more educated and digitally savvy than the general population. Another is that small retailers are willing to modernise their businesses in response to a challenging, shifting landscape. 

Finally, a growing digital ecosystem in Africa is enabling small retailers to offer new online solutions for payments, procurement and last-mile delivery.

This evolution will take different shapes across Africa—and will depend on each nation’s level of digital maturity and economic development. The strategies of modern retailers, such as supermarket and convenience-store chains, and solutions provided by tech companies, will also influence the future of traditional retail, the study says. 

The opportunities for various players in the retail ecosystem, therefore, will vary country by country. 

“Still, we expect that traditional shops will account for 65% to 75% of sales in most of the region through at least 2030. The expansion of e-commerce and payment services, moreover, might provide small retailers with a new role in digitised trade and payments,” the researchers say.

They note that traditional shops not only dominate retail in all but a handful of African markets; their share is surprisingly high even when considering African nations’ level of development. 

Globally, there is a strong correlation between per capita GDP and the market penetration of modern retail. Yet, in many African nations – including Morocco, Egypt and Nigeria – the reach of modern retail is well below its potential.

“Several factors make traditional retailers remarkably resilient. Small shops offer the proximity, flexibility and convenient operating hours needed to serve their communities. They also often allow customers with limited incomes to purchase small quantities on credit,” the report says.

“By comparison, many modern retailers in most of Africa have failed to devise a winning model that can be scaled up to address the needs of most customers. Their locations and value propositions primarily cater to upper-class consumers. And while modern retailers in Africa are embracing e-commerce, particularly since the onset of the Covid-19 pandemic, they are not doing so as quickly as in Southeast Asia and Latin America.”

Read the full report here

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