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Retailing Trends to Watch in Africa

December 7, 2011   ·   0 Comments

Retailing Trends to Watch in Africa

Oct 14, 2011 | Written by Editorial Staff

Twenty key trends need to be factored into the planning models of governments throughout the African continent in order to play a meaningful role as enablers of growth and development; especially growth and development that is conducive to formal, mainstream retailing.

We have identified 20 universal trends – in no particular order – that will shape the retail sector’s future. These trends are just as important to Africa as they are to the developed world with Africa now on the radar screen of international investors and retailers.

Trend #1: Foray into financial services

Both globally and locally, retailers are scrutinising the business opportunity in financial services. In SA, the most commonly used model has been for retailers and banks to form alliances to offer financial products to retailers’ client bases, e.g., Pick n Pay Go Banking – a joint venture between Pick n Pay and Nedbank.

Trend #2: Further industry consolidation

In retail, scale is everything. This drive for scale means that larger retailers will have to consolidate their market position – often through acquisition – to avoid being left behind. The race for scale will also mean the disinvestment of less meaningful operations – even if they are profitable.

Trend #3: Increased closeness to the customer

In an age of growing consumer choice and activism, successful retailers will be those who truly provide their customers with what they want. In order to attract new customers and retain the existing base, market research will become more prominent.

Trend #4: VDCS

Value, depth of range, convenience and specialisation will continue to separate successful retailers from the also-rans.

Trend #5: Relevant technology adoption

Technology that adds to a business’s overall efficiency is an important driver of future profitability.

Trend #6: Shortening the pipeline

In a world where consumers are ever more fashion-conscious, leading retailers will compete aggressively by slashing the time from product concept to unpacking the new product on the store shelves.

Trend #7: Internationalisation

Successful national retailers will continue to internationalise in the next five to ten years. Developed market players, particularly, are looking at emerging markets in a bid to boost their long-term growth prospects.

Trend #8: Value-adding intermediaries

There will, increasingly, be no limits on what a retailer can sell to its client base – including products outside of its traditional product categories. The internet has opened up a plethora of new channels to consumers, but it increasingly looks as though the most successful “e-tailers” will be those that can leverage their existing brands and physical infrastructure.

Trend #9: Importance of hand-held devices in communicating

As mobility becomes more important to consumers, hand-held devices – such as mobile phones – will become a predominant medium for customer communications and transactions as they bridge the gap between desire and action.

Trend #10: Private labels

According to Deloitte’s “2005 Global Powers of Retailing” study, “the most important mantra for retailers is no longer location, location, location. In a retail world that’s over-stored, commoditised, price-sensitised, cross-shopped and ultra-competitive, differentiation becomes the important driver of success in the marketplace.” Private labels are one way that retailers can differentiate themselves from their competitors.

Trend #11: Inner-city regeneration

The regeneration of inner cities is already well advanced globally and has seen former less-than-salubrious areas turned into prime real estate. This trend is primarily driven by the hunt of time-starved consumers for convenience in wanting to live, work and play in one geographic locale. Retailers will have to respond by situating their stores where the consumers are.

Trend #12: Inroads into non-foods by grocers

The advent of the supermarket threatened the livelihood of specialist food shops that had to adapt or die in the face of this onslaught. Grocers have added non-food lines to their product offering as they seek to expand their share of the consumer’s wallet. This presents a credible threat to which apparel retailers must respond.

Trend #13: The move to regional shopping centres

There are signs that international consumers – particularly in the developed world – are moving away from big centres to smaller, local complexes. But the smaller regional shopping centres will no longer be the stronghold of just local businesses as, increasingly, major chains open new stores in smaller centres.

Trend #14: The young favour speciality stores

The 20th century was, in many ways, the century of the department store and the shopping mall. But globally, younger consumers – who have proportionately higher spending power – are increasingly shopping in stores that specialise in limited merchandise categories.

Trend #15: Global supply chain

In the next five years, sourcing will become increasingly global as retailers look for the best suppliers of product with little concern for national borders.

Trend #16: Active community

Winning retailers will be those that win both the hearts and minds of consumers. This translates into customers having a positive tangible experience of the retail brand. Direct contact through more community involvement is one way to ensure this outcome.

Trend #17: Tourism leverage

An increasingly smaller world in which national and international travel becomes easier and cheaper all the time opens up a brand new market for national retailers: tourists.

Trend #18: Continued low price inflation

It is likely that low price inflation – and even deflation in some categories – will continue globally. One key driver will be the growing importance of low-cost manufacturers – not only China.

Trend #19: Talent

The war for talent will intensify globally. In order to ensure that their staff develop the necessary skills for their particular business, corporate companies will establish alliances with international education institutions and provide free tertiary education to employees.

Trend #20: Innovation

For winning apparel retailers, innovation will be more and more about taking control of their own trend and design, even if they’re value retailers.

Yet the more things change, the more they stay the same. A successful retailer needs to be progressive and at the forefront of meeting evolving consumer needs. But it also needs to focus on its brand and what that – really – means to its customers.

From Africa the Good News, the book. Contributed by Mpho Makwana.

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