Supermarket sales in Nigeria rose to the highest in at least six years in 2023 as retailers adopted quicker delivery methods and expanded consumer credit offerings.
The latest report by Euromonitor International shows that formal supermarkets’ overall sales increased by 24.4 per cent to N370 billion last year from N298.1 billion in 2022.
“In 2023, supermarkets in Nigeria navigated a dynamic retail landscape characterised by inflation-driven shifts in consumer behaviour, intensified competition, and adaptations to economic challenges,” the report said.
It said the high inflation rate in Nigeria significantly impacted consumers’ purchasing power, prompting a shift in buying habits towards essentials, and that supermarkets, well-stocked with groceries, capitalised on this trend and experienced growth in sales.
“The introduction of quick commerce by Glovo further facilitated efficient online grocery shopping, providing consumers with convenience and time-saving options. This combination of factors supported the sales growth of supermarkets and propelled their relevance in the retail landscape amidst economic challenges,” the report added.
Supermarkets are classified as retail outlets selling groceries with a selling space of between 400 and 2,500 square metres. Some supermarket stores in Africa’s most populous nation are SPAR, Marketsquare, Prince Ebeano, and Goodies.
While supermarkets recorded higher sales, hypermarket stores like Shoprite and Cash & Carry, with over 2,500 square metres saw a decline in sales of N92.6 billion from N100.4 billion.
“Supermarkets manage their inventories better,” Uchenna Uzo, professor of marketing and faculty director at Lagos Business School, said.
“To run a supermarket well is not just about packing any kind of product into the store, you need to have the right mix for that,” Uzo said.
Uzo added that supermarkets are better located than hypermarkets, in terms of being closer to neighbourhoods and communities which has been an advantage for them.
“For online, if you consider the rental costs of having a shop inside the hypermarket kind of place versus the kind of market that supermarkets run, it is cheaper for them to post their products online than for the bigger market.”
The report also revealed that Spar Supermarket emerged as a leader in the supermarket channel, particularly in catering to the convenience shopping needs of the high-income population.
“Loyalty rewards programmes incentivised consumer engagement, as shoppers sought to maximise benefits through increased purchases,” it said.
It noted that competition within the supermarket sector intensified, with brands like Market Square Supermarket and 4U Supermarket expanding their outlets to meet growing consumer demand in urban cities such as Abuja and Lagos.
Funmi Aiyepeku, head of Innovation, growth, and business transformation at FoodCo Nigeria told BusinessDay that one of the major factors that continues to accelerate the growth of organised retail in Nigeria is accessibility to competitive pricing.
“The reality is that most consumers find it cheaper to buy from supermarkets because they are able to save between 8-15 percent on pricing round-up which typically occurs in the open market,’ Aiyepeku said.
“Furthermore, the flexible payment option modern retail operations like FoodCo offer eliminates the need to carry cash around,” she said.
She added that this is not readily available in the open markets where transactions are limited to mostly cash so customers are forced to patronise Point of Sales operators at an additional cost per transaction.
“The increase in the cost of transportation also makes it imperative for customers to prioritise their shopping activities in locations that offer everything they need in one location.”
Inflation rate in Nigeria has accelerated to a record high, largely on the back of rising food costs which has been exacerbated by the removal of petrol subsidy and naira devaluation.
Data from the National Bureau of Statistics shows that the headline inflation quickened for the 16th straight time to 33.69 percent in April, up from 33.20 percent in March.
Food inflation, which constitutes more than 50 percent of headline inflation, also increased to 40.53 percent.
Rising inflation and sluggish growth in one of Africa’s biggest economies increased the number of poor people to 104 million in 2023 from 89.8 million at the start of the year, according to the World Bank.
The removal of fuel subsidies in Nigeria adversely impacted consumer purchasing power, leading to a decline in patronage for supermarkets from consumers accustomed to bulk purchases, according to authors of the supermarket report.
They said in response, supermarkets adapted by offering expansion initiatives and credit offerings to mitigate the impact of reduced consumer spending.
“Despite challenges, supermarkets continued to expand their presence, with brands like Market Square Supermarket opening new outlets and the reopening of Prince Ebeano Supermarket in Abuja following a fire incident. These expansion efforts contributed to the overall growth and resilience of the supermarket channel in Nigeria,” they added.
Euromonitor noted that the recent introduction of quick-commerce by Glovo presents a significant opportunity for supermarkets to accelerate their growth and meet the demands of young, busy consumers seeking convenience amidst hectic schedules.
“As the adoption of quick-commerce grows among the emerging middle class, supermarkets are expected to forge more partnerships with delivery platforms like Glovo to facilitate rapid grocery delivery. This collaboration will enable supermarkets to tap into the burgeoning online market and boost omnichannel growth, enhancing their competitiveness in the retail landscape,” it said.
The firm added that by bringing supermarkets closer to consumers and leveraging proximity as a competitive advantage, brands like Market Square Supermarket, Prince Ebeano Supermarket, and independent supermarkets can stimulate sales value growth and enhance market penetration over the forecast period.
