What Shoprite exit means for Novare, retail business in Nigeria

In the next four days, Retail Supermarket Nigeria (RSN) Limited operating under the brand name, Shoprite, will be closing shop at Novare Wuse Central Mall, Abuja, according a recent announcement by its management.

This action, in the opinion of retail market watchers in Nigeria, holds implications for both Novare Real Estate Nigeria Limited-owners of the mall – and the retail business in Nigeria which, like other sectors of the country’s economy, has been gasping for breath over bad economic conditions.

Folakemi Fadahunsi, RSN’s chief executive officer, explained in statement obtained by BusinessDay that the decision to close the shop on Sunday, June 30, 2024 was made after an evaluation of the store’s financial situation and the current business climate in Nigeria.

“We believe this is the best course of action for our organisation’s long-term growth,” Fadahunsi noted.

Read also: Shoprite to shut down Abuja mall over poor financial performance

For Novare, this could not have come as cheering news, more so as the company is still smarting from a controversy over the purported sale of its four retail facilities in Nigeria which hit the Nigerian retail market like thunderbolt in the third quarter of 2023.

Novare was one of the few institutional investors that took the Nigerian retail market by storm, developing large-size Grade A retail properties in major cities of Nigeria. The firm contributed significantly to what was, arguably, a revolution in that segment of real estate in the country.

The company, in a surprise move in 2023, was reported to have announced that its four facilities including the Lekki Mall, Apo Mall Abuja, Novare Central Mall, and Gateway Mall Abuja were up for sale, which was interpreted as its decision to exit Nigeria as a whole.

Though the company has since assured that as an investment solutions provider, it remains confident in the Nigerian real estate market and is not exiting the market, experts say the ghost of that announcement has not yet left the company, saying that the planned exit of Shoprite will affect it significantly.

Shoprite is the anchor retail tenant at the Wuse Central Mall occupying 7, 178 square metres of retail space on the mall’s ground floor.

“Shoprite’s exit will not only affect foot-falls in the mall, but also its overall revenue profile,” Sydney Iwenjora, an Abuja-based real estate consultant, said.

Iwenjora added that it will also affect other retailers in the mall, including international and local brands in banking, telecommunication, technology, fashion, food, houseware, pharmacy and cosmetics. “Novare Central is also home to a variety of restaurants and speciality stores that enhance its status as a lifestyle centre,” he said, pointing that all these brands will be affected one way or another.

Besides Novare as the landlord or space provider, this exit also has implications for both retail and job markets. As a South African retail chain, Shoprite is a strong brand and its coming into Nigeria is almost synonymous with the growth of retail market in the country.

Shoprite is not only a strategic anchor tenant in most of the retail outlets in Nigeria, but also a trade booster to other retailers in a given mall. This is why Cheng Fuller, a retail expert, reasoned that apart from the large number of jobs that would be lost, other stores within the same proximity of the store (Shoprite) could suffer further and this was going to be the case at Novare Central.

It is expected that there will also be problem of unemployment as Shoprite engages many people, including skilled, semi-skilled and unskilled labour.

Experts are of the view that with the state of the economy, especially at the macro-level where inflation is galloping and exchange rate is high and volatile, the exit of this brand may happen across other locations.

Consumer purchasing power is falling on daily basis and even the little they have in their pocket is being eroded by inflation which, in the last eight months, has been on the rise, peaking at 33.95 percent in May, 2024, according to the National Bureau of Statistics (NBS) figures.

Before now, analysts had been upbeat on foreign interest in the Nigerian market. “There has been a strong interest from notable international brands (not just the regular South Africa ones) who are eager to come to the Nigerian market and this enhances the take-off of many malls,” Chu’di Ejekam, a former director at Actis, told BusinessDay then.

But the market has tumbled which, according to Alpheus Mama, a consumer analyst at a stock broking firm, “is in line with the expectation that foreign retailers will begin to exit the market considering the distortion in economic activities, continued devaluation of the naira and a weak consumer market.”