GFK outlines the retail landscape in Africa and how consumers choose

Following research conducted in South Africa, Kenya and Nigeria, it has become evident to GfK that the growth of Africa continues to be a buzz word as the continent increasingly evolves. Based on this trend, major retail chains have seen the opportunity to capitalise on this growth and have been driving the evolution of Modern Trade through aggressive expansion into Africa.

South African based chains such as Shoprite, Pick ‘n Pay, Spar and Massmart have been at the forefront of expansion in Africa. Along with large numbers of store openings, many retailers are upgrading current formats, especially in areas where expansion may not necessarily be possible. Retailers are further focussing on supply chain efficiencies to drive distribution as well as price competitiveness.

South Africa continues to see a shift towards Modern Trade stores, driven by a mixture of push and pull factors. Pull factors include raised value perceptions and wider choice for brands and pricing while push factors include informal trade, which is distrusted and expensive but necessary as well as price dynamics, which are forcing LSM C/Middle LSM away from informal channels.

As a result, the key strategies shoppers implement to overcome these difficulties are channel hopping, shopping off broadsheet and playing the playing the price/ gram value equation in store.
Not surprisingly South African consumers lower and upper LSM’s are spending 70+ percent of their larger shopper trips in the modern trade. However GfK still find around 45 percent spending their smaller/top up shopping trips in the traditional stores – a significantly high percentage.

Kenya shows a similar trend to South Africa on its lower LSM’s, however its upper LSM’s spend 95 percent on bigger shops and 80 percent on smaller shops in the modern trade. These are significantly higher proportions spent in the modern trade than seen in South Africa Nigeria still sees a large amount of shopping done within the traditional markets, as to be expected.

The lower LSM’s spend 59 percent on bigger shops and 64 percent on smaller shopping trips in the traditional trade. There is higher penetration of the formal market amongst the upper LSM’s within Nigeria with bigger shops in the modern trade accounting for 61 percent and smaller shopping trips 46 percent.

Across countries and LSM’s, where consumers choose to shop remains the same: it is based on where they get the best service and best range of brands as well as where they get the best price and payment terms and what is more convenient and closer to home.

For South Africans, when asking consumers where they choose to shop, modern store outlets are being chosen on their best range of brands as well as pricing, across both upper and lower LSM’s. Convenience also plays a role, especially amongst the upper LSM’s. Traditional stores are chosen mainly because of their location to home for consumers.

In Nigeria, consumers are driven to the local stores for prices and the convenience of being closer to home. They, however, choose to shop in the modern trade for the better range of brands and services offered to them and the price benefit they often receive.

Kenyans are looking for the convenience of being closer to home in traditional stores, whilst in modern stores they are looking for a better range of brands and service and better pricing.

In conclusion, GfK has found that the formal trade is definitely the way of the future and the retailers are capitalising on this. However, with a shrinking wallet and price sensitive consumer, the competition is likely to be fierce.