SPAR positioning itself as leader in Nigeria’s retail market

Tobias Wasmuht, CEO SPAR International was recently in Nigeria for his first official tour of Spar Nigeria stores. He spoke with FRANK ELEANYA and CHINWE AGBEZE on the retail market in Nigeria and SPAR’s investment in the country.

There is an influx of mega shopping malls like Spar into Nigeria, what is the motivation? Why Nigeria?

If you look at Nigeria it is obviously the largest economy in Africa. From a macro point of view, the demography is truly young and growing and from any retail point of view it is very important to have a young customer base which we have here in Nigeria. We have a growing middle class. Statistic show that over 40 million Nigerians are in the middle class with an income of $7,500 and that makes it an extremely attractive market which many retailers are particularly looking at Nigeria will say is underserved if you make comparisons to other markets in Africa. You have South Africa where there is a fifty million population with over 5,000 modern supermarkets, modern trade stores, so if you compare that with Nigeria with its population and with the scale, there is a lot of opportunity. The demand is here, the growth is here and the opportunity to have a better lifestyle in everyday life.

SPAR in German means to ‘save money’, how are you making customers save money?

SPAR comes from German which means ‘to save’. It is really because of our international scope. We are in 41 countries and 25,000 stores. Our presence is growing and it is working together for the benefits of our customers and leveraging on international standards to help them make savings throughout the value-chain to reinvesting back into enterprises which is important for our customers.

What has been the experience so far operating in Nigeria?

In terms of our experience with the Artee Group, it has been extremely positive. The challenge we had coming in 2010 was building up this supply chain and that required investment. It required focus and resources to be taken to distribution centre, processing and building those supply chains so we can have better customer proposition. Initially our store openings were slower now we have upped the pace. We are going from the square meter chain we have to nine large stores now in Nigeria. We opened in Abuja just days ago. There is another three to four stores planned at the end of this year. So we are establishing the backend to have a better basis to accelerate growth.

How do you achieve that?

The local management team here are doing a fantastic job and have been really strategically focused in their operations. They have tapped into the global SPAR worldwide network and taken the key resources to allow them to fast-track their development in the entry competition. They have taken initiatives, ideas and products and services and marketed them. And that’s really how we work; all the countries share their resources together. They have tapped into the international and combined it with the best that’s local because they are from Nigeria, they are Nigerians and part of Nigeria and therefore able to really relate with the consumer and their customers.

Recently, PwC released a report that 90% of retail sales are controlled by retailers in the informal sector, do you react to this?

Every market issue is transition from informal to formal. South Africa, for instance, has 60% formal and 40% informal. And that has only changed in the last two decades. It is moving with the economy. As the economy develops and the infrastructure develops, as living standards and living quality requirement change, we have a move to organised retail, which brings with it consistency in safety, standards and what comes with development. Today, we are at the beginning of that in Nigeria. Many numbers are put in, but these are estimates because it will be difficult to capture today how large the informal market is. In terms of the trend, it boils down to what I said about the size and the scope of the market. There will be a shift increasingly because there will be demand by the people of Nigeria and the customers. The question is when the shift will happen.

How is SPAR able to do business with the prevalent scarcity of foreign exchange?

Of course it affects our business, but not as gravely as one will expect because the bulk of the products are from Nigeria. Over 70% of the foods that we pack are locally produced. So foreign exchange has limited effects on food and grocery. The area much more felt is in electronic because it is virtually dependent on import and that’s where we are currently at.

The economic crisis has affected the purchasing power of the average consumer, does that affect SPAR?

If we look back 2008 and to similar markets in Europe, Africa and Asia, we have seen some crisis in the markets. Greece, Spain and Italy you will recall were highly affected by the recession. It also affected South Africa but we have been particularly resilient. Last year we grew 18%, the fastest in Africa, today we have sales in Africa of about $5.7 billion which means 18% of our global turnover already comes from this continent. In terms of Nigeria, again we have been very resilient. We have not been affected because we see again this particular consumer class has also financial ability in the household spending and will continue to spend. 2016 has been a very strong year for SPAR Nigeria. A lot of that has been led by like-for-like growth which has been very positive. But the significant growth has come from the new store development that we’ve had.

Competition is intensifying in the formal retail market; does SPAR have what it takes to stay ahead?

In terms of our market, we are very used to competitors, not just in Africa. Elsewhere, like in China, I was there for ten years and we competed against Walmart, Metro and all the top 25 retailers in the place. We competed and we won and we grew our market share in key areas in China as well. So competition in our sector is to be expected because of the size of the market. Think about the development here and the overall number of stores serving per capital. We can measure the square meter of retail space currently serving per capital emerging population, it is very low which means we have a long way to go. So we don’t see it being saturated at all. We see plenty of room for growth; plenty of room for the whole sector. Competition is good in that sense because it stimulates the sector. It stimulates the price. It stimulates the supply chain to allow us to get the scale to bring that into development.

We have a different way of chasing that competition which is that our stores are significantly large which offer a large range and wide choice of products. We have extensive range of groceries, bakery, we have fresh and dried. We are in a very strong position and we have our partners fitting the electronics. Where we want to move this and it is very important for the future at the top of the supply chain, is working with Nigerian producers and investing in them. We have significant experience with farmers, sourcing directly fresh produce. Where our point of difference will be is in fresh fruits because that is vital to driving traffic. We have other key initiatives that we are driving with the small scale farmers. These are projects that have been tried and tested in a number of African markets and Asia; we want to bring it to Nigeria.

What are we likely to see in terms of technological initiatives from SPAR?

If you look at the future development of technology, we have our presence in over 40 countries and various depths of technological initiatives. We have been offering many of that in China since 2010 when we turn online. We have moved to the use of mobile. What we are doing is already prevalent in a number of markets. It is really a strong point for SPAR organisation because we have this pool of innovation globally. That means each of the countries can adopt quickly. We are going to be seeing a lot of movement in terms of use of online, use of mobile, particularly mobile. That is going to be a bit strong here in Nigeria and Africa as it has already been in markets such as Indonesia. We have various forms of communication in terms of utilizing our loyalty card and we are more personalized in marketed communication.

On the benefits of online shopping, are you likely to partner with an established online platform?

We have experiences of doing that elsewhere, but we haven’t started that in Nigeria. We have experiences of going it alone; we have an online business in which we deliver to your home. We have models in which we partner with retailers. But we have to come back and look at each market and ask “what is the right solution here?” “Who is available?” “Do we want to partner?” I think at the moment before we go too much into online, the key focus is in investing in retail markets because I do believe that this market has tremendous potential. We do not have enough square-meter retail serving the demand of the Nigerian consumers. We got to focus our efforts there. It can be very quick; the good thing about us is that we are very quick- adaptable. We can bring in those solutions that we need to.

What has been your unique selling point?

The unique point of difference is that first and foremost we are local then global. We always partner with a local entrepreneurial retailer, that way the entrepreneurial spirit and integration into the local community means that we are very quick to understand the customer and also quick to bring in the materials and the resources to allow our local partners to fast-track. We have the scale of international resources and with the adaptability entrepreneurial spirit you need to seize opportunities, particularly in emerging markets.

Are there expected deals and acquisitions?

We recently saw an acquisition for SPAR South Africa buying a majority share in Spar Ireland. So within our group, merger and acquisitions are taking place. That is a significant move internationally.

As you expand in other Nigerian cities, what should the consumers expect?

What they should expect from us is a world class shopping experience, fresh products, value pricing, and exceptional service.

In the event that you move into new cities in Nigeria, how do intend to bring the rural people into the fold of SPAR customers?

We are retailers and we have gone very deep in the society. It has taken time, like in South Africa where we are serving the rural people. They are a very important part of our business. We have a certain programme with the local farmers, so that’s our model. We are working with independent entrepreneurs and retailers to become part of the largest Spar group for them to benefit from the scale that we have developed with the rest.

FRANK ELEANYA and CHINWE AGBEZE