The buzz in the Nigerian retail market today is no longer the curious mix of Shoprite exiting the market when a Burger King is making a bold entry. The good news, instead, is that Africa’s largest retail chain has been acquired by a local investor.
Speculations were laid to rest last week following a media report which disclosed that Persianas Group, a local property development company, were the new owners of Shoprite.
The Persianas are the owners of The Palms Mall, the first formal retail outlet in Lagos, which has branched out to other Nigerian cities including Enugu, Kwara and Ibadan. That report evoked reasonable excitement in the retail market.
The Group is also the promoter of the Jara Superstores (Mall) brand. Speculations are rife that they may change the Shoprite to Jara. How this might affect their new business remains a matter of conjecture.
Amid the market excitement, experts warn that the local content in the new ownership of the retail chain comes with loads of expectations and implications, pointing out actions the new investors should take to keep the brand intact and remain profitable.
“If you look at South African businesses compared to Nigerian ones, you will see that when it comes to marketing and communication around their brands, they are always a step ahead. That is why they are very strong,” Ken Egbas, a marketing communications and brand expert, noted.
He noted further that South African brands work with high level professionals different from their Nigerian counterparts. He therefore advised that the new investors need to understand the peculiarities of the Nigerian market and the requirement of the target audience.
To Cheng fuller, a retail expert, what the market expects from the new investors is to maintain the five basics of shoppers’ experience which he listed as clean and clear aisles, shoppers getting what they want, good prices, and friendly and helpful staff.
“The person should have enough capital to buy sufficient stock. Shoprite has customers; the people who invested in Shoprite have left, the typical customers’ perception might change. He must also make sure that shopper-experience does not drop but rather improve,” he said.
It is believed that whether the new owners will fail or succeed depends on the management and the people in charge. But given Persianas Group’s experience in retail market which dates back to 2004 when the Palms was opened, chances are that they will succeed.
Ayorinde Akinloye, a consumer analyst at United Capital, believes that if the management knows their audience, it will be successful because the brand is there.
“I think the issue South African owners of Shoprite had was that they were investing in dollars, so they looked at their returns in dollar terms. A Nigerian investor would, most likely, look at it from Naira perspective, he reasoned.
Recently, Shoprite announced that having concluded the terms of sale which involved the disposal of 100 percent equity stake in its Retail Supermarkets Nigeria Limited subsidiary, it was set to make a clean break from Africa’s largest market after 16 years.
In August 2020, the retail giant announced that it was discontinuing operations in Nigeria, citing a re-evaluation of its operating model. But experts say there are more to the exit than disclosed.
Egbas blames the exit on the shrinking value of the local currency in Nigeria. “Over the years, we have seen the Naira drop and if you are a business person who depends a lot on imports from foreign markets, you will be spending more than you plan,” he said.
He added that there is uncertainty around expenditure, depending on the international market with a currency that is not stable, profit repatriation and unstable power supply. Another issue is the ports where it takes so long to clear the goods which, sometimes, expire before they are cleared.
“One of the things that made Shoprite want to leave is that, over the last few years, we have seen the growth of very strong competition, whether they are local or foreign. And this means that your profit margin is going to reduce.
“And the thing that could have nailed the decision to pull out is the post COVID-19 purchasing power of the average Nigerian,” he noted.
According to its earlier announcement, Shoprite is only awaiting the approval of the sale transaction by the Nigerian Federal Competition and Consumer Protection Commission (FCCPC) to effect the exit. It expects to get this approval by the end of 2021 financial year.
Though a plus for the local investor-community, the implications of the exit for Nigeria’s real estate and job markets are quite significant. It is expected that there will be massive job losses, reduction in investment and capital inflow.
It is feared that since investors in retail mall development are predominantly South Africans, they are going to withhold investment. With slow activities in the sector, there will also be loss of income to professionals and artisans in the building industry including architects, engineers, bricklayers, carpenters, iron fitters, etc.
