Based on four dimensions: Market size, Market Saturation, Country/Business Risk and Time Pressure among other factors, most African countries have shown an exponential business potential in the African Retail Development Index Points (ARDI) report that has also identified Africa as the most attractive for retail expansion today.
For retailers with basic offering, it might be most instructive to think of Africa as a set of opportunities that can be augmented and added to one another rather than just one singular opportunity. The growth in the middle class in Africa, increased consumerism, the spread of malls, land being taken up for development for retail purposes and Sub-Sahara’s young and connected middle class that is growing fast and still deciding on its favorite brands are the core reasons behind Africa’s immense potential in business.
According to Mirko Warschun, A.T. Kearney partner and leader of the firm’s consumer industries and retail practice for Europe, Middle East, and Africa, “If scale is not your biggest worry, Africa’s mature markets—in the ARDI, they include Botswana, Namibia, and South Africa—remain solid points of entry, with established shopping cultures, relatively high wealth levels, and well-established infrastructure. In these markets it is important to bring a differentiated retail concept.
Tanzania leads East Africa
The 2015 ARDI has ranked the top 15 Africa countries according to market attractiveness for retail expansion. The Index identifies three distinct differences in stages of retail advancement in the Top 15 countries—basic, developing, and mature—with only Southern Africa falling into the mature bracket. They are characterized by having a formal shopping culture, international and growing private label exposure, innovation, and stable and transparent pricing. In this market, the key purchase drivers are convenience and quality.
ARDI 2015 has revealed Nigeria (#4) moved down the index, despite its market size and room for growth. “Nigeria has massive room for growth in formal retail with 25 new shopping centres in development,” said Warschun. “True spending, however, remains comparatively low as the ‘true middle class’ is a lot smaller relative to the smaller countries ranked higher.”
With its tremendous potential and strong economic projections, however, Nigeria is still a market to consider.
While Tanzania (#5) has dropped a notch, it was the largest and most stable of the East African Community countries and remained an attractive retail market said Warschun. “Tanzania is in the early stages of development, and therein lies the opportunity,” he said. “This unsaturated market has one of Africa’s fastest growing retail sectors, boosted by new shopping malls.”
The 2015 ARDI ranks the leading 15 nations and reconfirms the region’s potential arising from not just oft-discussed markets like Nigeria and Ghana, but also small, dynamic markets such as Gabon and mid-sized but fast-growing countries like Angola.
In the last report, Nairobi was named one of the most populous city in Africa. Retailers such as South Africa’s Shoprite, which operates in more than 16 African countries, and Nakumatt, based in Kenya and has stores in neighboring Uganda, Rwanda, and Tanzania, were recognized to have done most of the expansion.