I love hanging around markets – although I try not to buy randomly: I always go with my shopping list. When you are in a new country, this is a great way to get a flavor for what life is like for local people. In Kenya, you get a variety of flavors from dusty farmers’ markets to upscale supermarket chains owned by locals. And this reflects the diversity of Kenya’s population.
The news is that international retail chains are entering the country. I read last week in the Financial Times that Walmart just opened its first store. Digging a bit, I learned that Carrefour has plans to open in September. I understand these are their first inroads in sub-Saharan Africa (SSA). South-African chain Shoprite operates quite successfully in 15 sub-Saharan African countries. It will be interesting to see how Western chains do.
The middle class is growing in SSA. Consumer spending for the whole of Africa is projected at USD 2.2 trillion in 2030, up from USD 680 billion in 2008 (according to the African Economic Outlook 2015). Clearly, this presents a great business opportunity for retail chains – one that is rife with challenge.
Internationalizing in SSA is not an easy venture. I wrote last week about the do’s and
don’ts of internationalizing there. When it comes to distribution, local adaptation is important. On the one hand, it takes understanding consumer preferences. The middle class is aspirational. But still, SSA consumers have a strong preference for products they are familiar with or that are recommended by someone they trust. Then there are the cultural traits that translate into demand for products such as wigs for women, who love to change their hairstyles!
On the other hand, local adaptation in retail requires managing the supply change. This can be challenging: from identifying and dealing with suppliers in appropriate ways to managing the logistics in environments with deficient infrastructure.
Walmart’s international expansion efforts are well known for the time it took them to adapt to each new country. Interestingly, according to the Financial Times, one difficulty they faced when opening their Kenyan store was that they had to import the trademark bright magenta ink they use in décor because nobody in the country could produce it. But at least, they’re entering Kenya through Massmart, a South-African chain that knows the peculiarities of SSA.
Any experiences with retailing in SSA?
Shoprite has actually struggled in East Africa and just sold all their stores in Tanzania to Kenya’s Nakumatt. Competing with Nakumatt will be the biggest challenge for Walmart’s GAME supermarket at Garden City Mall and Carefour’s soon to be open store at the incredible Two Rivers complex. Steep learning curve coming.
One cannot stress how important it may be NOT to enter “North of South Africa” via South Africa. Many companies have learned a good lesson in this regard. East Africa caters to 400 million and is a perfect “launching pad” itself, via Nairobi, Dar es Salaam and Kampala, for any company wishing to expand to Africa.
Thanks for sharing your insights, Patrick! Your comment about not to enter “North of South Africa” via South Africa is quite interesting. In a visit to South Africa, I noticed how they were eager to transition from positioning themselves as “we’re not Africa” to “we’re the gateway to Africa.” From what you say, that transition is more a will than a reality…
I agree with Patrick´s statement. Being in Angola for the past 8 years I have seen several attempts by SA to bring business to Angola with no success. Shoprite is here, but its expansion has been slow and growth has been taken over by the Kero chain.
I am interested to see how the Walmart entry develops. I think that North American companies are very close-minded and not educated on the international requirements faced in different countries. SSA is a much different market than the USA or Western Europe.
Interesting… I don’t have hard data but while in Nigeria, I was told that Shoprite was growing and quite successful there…
I wrote a post a few weeks ago on “Do’s and don’ts of internationalizing in Africa” https://blog.iese.edu/africa/2015/06/03/dos-and-donts-of-internationalizing-in-africa/
If you have a chance to look at it, I would be interested in your opinions.
Thank you, Douglas!