Despite its huge market size, Nigeria is lagging far behind South Africa and Kenya in modern grocery shopping, new data from a global market research firm have shown.
According to data from Euromonitor International, Nigeria’s sales value of $890.2 million recorded in 2021 from formal grocery chains is lower than South Africa’s $25.6 billion and Kenya’s $1.9 billion, despite having twice the population of the two countries combined.
Nigeria’s inability to formalise the grocery chains constrains the ability to gather data on consumer trends and government planning, deliver value to the country in the form of taxes and encourage investments into the retail space providing more job opportunities.
Christele Chokossa, a consultant at Euromonitor International, said infrastructure development, business models, accessibility across income groups are some of the criteria that Nigeria lacks to be at par with its peers.
“For instance, South Africa has over 2,000 shopping centres, against about 570 for the rest of the region. Egypt was the second largest with about 106 in 2018, followed by Kenya with about 66, and Nigeria with 53. Although there have been some improvements over the past years, the ranking remains fairly the same,” Chokossa said.
South Africa is home to large chains of modern grocery outlets like Shoprite, Pick n Pay and SPAR.
Chokossa said, “Shoprite has over 2,000 modern stores in SA, versus only 23 in Nigeria. This has been historically the same when you compared the number of chained stores between Nigeria and Kenya.
“Shopping at modern grocery stores in SA is standard because they are accessible across income groups, whereas in countries like Nigeria, they are often concentrated in higher income areas of city centres.”
Uchenna Uzo, a consumer expert and faculty director at the Lagos Business School, noted that the mindset of people only seeing retail as an opportunistic business was a major obstacle for modernisation.
“Many people in retail don’t see it as their own future aim; they see it as a buying and selling thing or a chop-and-go business, which limits their ability to modernise their structures,” Uzo said.
He also cited the lack of formal training for people in the retail businesses. “We don’t have many formalised systems to prepare and satisfy people who are entering retail unlike other countries.”
Grocery stores, which deal in the sale of most types of food and other items needed daily, are an important aspect of retail trade. There are traditional grocery stores and modern grocery stores.
Modern grocery stores are usually larger in size and have a wider selection than traditional grocery stores. Examples are convenience stores, discounters, forecourt retailers, hypermarkets and supermarkets. In Nigeria, Shoprite, SAR, Prince Ebanoe, Hubmart and Justrite are among the popular supermarkets with branches or chains across the country.
According to experts, modern retail stores have formalised systems for managing inventory, sales, and the relationship with shoppers and prices are fixed, unlike the traditional ones.
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“Nigeria is still dominated by traditional retailers. Most consumers still shop stand-alone retail outlets, often located in residential areas, especially for traditional grocery purchases,” Analysts at Kearney, a global management consultancy firm, said.
Heavy investment in infrastructure, good supply chain, expanding middle class, strong incomes, purchasing power and urbanisation are the defining characteristics for the success of modern grocery chains. But Africa’s biggest economy lacks these factors.
Before the two recessions experienced in the last six years, Nigeria’s retail sector was a formidable consumer market due to a fast-growing middle class, rising consumer income and urbanisation, which made it an attractive retail investment destination for local and foreign investors.
This made Mckinsey & Company in 2013 to project a $40 billion growth opportunity in food and consumer goods in Nigeria between 2008 and 2020.
However, this was not realised as the economy was challenged by two recessions, macroeconomic volatility, rapid naira depreciation, weak purchasing power and household incomes.
The tough business environment also made some foreign retailers exit the country including Truworths, Mr. Price, Shoprite and Massmart.
Cheng Fuller, a retail expert, said Nigeria was facing a generic problem, which is the ease of doing business. “For you to set up large grocery retail, you need building, constant power, affordable products and an effective supply chain.”
“Before the recession, prices of commodities in the retail chains were even better than the traditional ones. But now, with the astronomical cost of doing business, the price of groceries is almost 25 percent higher than in the open market,” Fuller added.
On the importance of modern grocery retail, a report by the United Nations Conference on Trade and Development cites that it benefits consumers by offering a one-stop shopping experience, a wide range of products and an overall shopping experience that is a package of more than just physical products at convenient locations.
“Sometimes referred to as a ‘price-quality-range-service’ package, this offering can reduce overall costs for consumers, including transport, time, search, information and storage costs,” the report added.
