In spite of its imperfections and newness, retail business had very good showing on entry into Nigeria, most probably because that entry coincided with the emergence (or re-emergence) of the middle class in the country, estimated at 23 percent of the country’s 170 million population.
The middle class, with their desire for new and convenient shopping culture and taste for foreign products fueled by fairly deep disposable income contributed significantly to the development and growth of that segment of the real estate sector.
Within the period spanning 2005 when the first mall in Nigeria—The Palms—opened for business, and 2015 when the economic slowdown set in, leading to the country’s worst economic recession in 25 years, the retail market in witnessed what could be described as retail revolution, gaining significant interest from local and international investors.
These were investors, developers and retailers who supported the development of modern shopping malls and centres similar to what obtains in Europe, America, South Africa and other developed nations.
So, from a zero base, the market attracted foreign direct investments estimated at $3 billion deployed to the development of about 20 shopping malls and centres in over 10 cities, including Lagos, Ibadan, Abuja, Port Harcourt, Kano, Warri, Ilorin, Enugu, Owerri, Kaduna, among others.
In 2015, the sector experienced a huge setback in its growth and development due to some abrupt modifications to regulatory policies which stalled new development activities and stifled existing operations in the market. The impact of the 15-month recession brought the market down on its knees with low patronage, rising vacancy rate, shrinking footfalls and general slowdown in business activities.
But the future remains bright for this market. “Overall one is still very optimistic about Nigerian retail market because, given where we are in real estate development, we are still at the very early stage of development”, Michael Ch’udi Ejekam, a retail business analyst, told BusinessDay.
To be part of the future which the market promises, investors have to rethink their investment, especially in the areas of project size, location and stocking of wares. They have to study and understand three basic things including the nature of the consumer, issues that investors face, and the nature of retailers. Of these, the nature of the consumer is overriding.
“The reality of the Nigerian consumer is that an average household spends 60-70 percent of its monthly spend on food and beverage consumed at home which is estimated at $211 billion annually”, Ejekam explained, adding, “because of the challenge of power, households cannot afford to go out there, buy large quantity and store in refrigeration. This means that they have to go out frequently to buy their stock. The consumer, therefore, cannot store for long period because of power failure.
Again, there is low car ownership rate in Nigeria which means that shoppers cannot go far for their shopping. They want to be able to walkk short distances to do their shopping.
All these influence the kind of mall that a developer has to put on the market. He has to create something within the neightbourhood. This explains why community or neighbourhood retail mall is, increasingly, gaining investment interest particularly within the Lagos submarkets.
These kind of malls are generally smaller in size than formal retail malls; they are closer to the people and stock mainly household items. “Retail business is not about the size of the mall or store, but good customer experience and satisfaction”, explained Murat Bektaster, MD/CEO, Hubmart Stores Limited.
At a time when the big-size malls are contracting, Hubmart is expanding with three outlets already in Lagos. These outlets are one-stop-shops for all household needs. “We have created an environment where customers can find everything they want under one roof, get the best quality of ultra-fresh produce, and have a delightful, fulfilling and exciting shopping trip. Children are also not left out as we have innovative kiddy-focused shopping carts and baby trucks to delight them as well”, Explained Cheng Fuller, the company’s assistant vice president, Marketing.