Changing Dynamics in the African Continent for Traditional Retailing

Now it is no longer a hidden insight that Africa is set to become the next big retail market in a few years from now. Some of the best indicators of this are a growing middle class, rising levels of urbanisation, changing consumer behaviour, and increasing adoption of digital technologies. A glance at the following statistics is helpful to make a sense of what these indicators are indicating at.

Africa’s population stands at 1.4 billion which is 22% of the current global population. In other words, 2 out of 10 retail customers are in Africa. The middle-class population in the continent stood at 34.3% of the total population in 2010 as per an UN report. Given the improvements in other demographic and economic parameters in Africa, this rate could only increase with time. A growing middle class hints at a growing base of customers with disposable income which is a good sign for retail that goes beyond essential goods. The retail sales in the region clocked over USD 500 billion in 2018. This represents a minuscule share of the global retail sales level is a significant figure by itself. If the rate of urbanisation is considered, Africa’s 44.9% is close to the global average of 56%. While comparison with global statistics may not serve a great deal, having close to half of the population in urban areas makes it an interesting scenario for creating retail avenues.

Big and emerging but Africa is also a diverse continent on a canvas of contrasting demographic and economic growth patterns from region to region.

Some strong developments in the African retail sector are highlighted below:

Modern Retail

More new shopping malls are coming up in many regions in Africa housing prominent local, domestic, and international brands. These initiatives serve as evidence of the trust and confidence of all stakeholders who have invested in these commercial projects. Many existing supermarket brands and businesses are also expanding the network of their stores. The mushrooming of convenience stores in small and big cities hints at the presence and rise of a very specific consumer base that wants on-the-go shopping.

ECommerce

The rise of eCommerce is undeniable in the African continent which is driven by several factors.

To start with, mobile penetration in Africa is one of the fastest in the world. Smartphones play a vital role in promoting eCommerce shopping. Close to it is the rising internet penetration in Africa. When the number of smartphone users begins to increase, it also provides impetus for ISPs to offer services and catch up on that market opportunity. Smartphones and internet services reinforce one another.

Africa’s growing middle-class population also provides eCommerce players the room to offer a wide variety of merchandise that goes beyond the basic stuff. The same flexibility applies to services associated with eCommerce as well. For example, having additional disposable income gives customers the financial confidence to avail of premium services like free delivery or automated repeat purchases.

Another important factor that promotes eCommerce is the use of online payment methods. Online payments are not only convenient for customers but also suitable business-wise. A significant growth has been observed in mobile-money transactions carried out in many African countries. For instance, mobile-money transactions in Nigeria doubled to hover at 800 million in 2020. Figures in that range are alluring for eCommerce.

Today, traditional retail and eCommerce are treated as complementary and not competing from the perspective of channel and distribution strategies. This affects traditional retail positively when omnichannel is viewed as an opportunity.

Social Media and Digital Marketing

Social media and OTTs are the two most common uses of smartphones. Shopping and browsing eCommerce platforms (goods/services) are close. The rest of the specific utilities like calling or making a payment constitute a tiny chunk of total usage time. This has taken the attention of advertisers. Platforms like Facebook, YouTube, and OTTs have become prime locations for B2B and B2C advertising. The same trend is witnessed in many African countries. Retail brands and businesses are using online platforms for digital marketing showing that they see potential customers and clients in those platforms.

Consumer Behaviour

With increasing competition, customers arrive at an advantageous bargaining position. It makes customers more sensitive to prices. Now new but this price sensitivity is growing in many African countries. Value for money has taken centre stage paving the way for willingness to pay for quality products and services. The growth of eCommerce has further elevated the discernment of customers towards value, price, and quality. There is a growing demand for omnichannel shopping platforms that give them a smooth and seamless integration along their shopping journey. ECommerce has also changed how quickly and conveniently orders are delivered affecting the expectations of customers who used to traditionally rely only on physical shopping from physical stores. Easy return-replace policies also lie on the same line of expectations.

Despite all the brouhaha around personalisation, the latter is still not such a sought-after feature by customers anywhere in the world barring maybe a few exceptions like the luxury sector. Personalisation is good to the extent it is explicitly sought or does not appear as preying on private data and information. As retail and eCommerce consultants for the African market, we emphasise that personalisation is done with proper planning and adherence to the sentiments of customers and clients. While doing so, maintaining digital transparency and gaining the consent of customers should find prominence. The rise in smartphone and internet penetration is already a known phenomenon accompanied by an increase in the share of the population that uses social media and other digital platforms for different purposes including shopping.

Sustainability

Globally, there is a growing demand for sustainable products and services. Things are no different in Africa. In fact, sustainability and environmental concerns might be taken more seriously by customers in this part of the world. Support for local businesses and sustainable sourcing often echo in the African retail industry. People expect transparency from organisations on these and other related issues. There is a growing demand for shopping experiences that reflect the rich cultural heritage of the local communities. For example, traditionally woven baskets are offered as handbags in retail stores in many parts of Africa.

Modernisation of Traditional Retail Businesses

Omnichannel Retail

Before eCommerce, the norm for retail shopping was visiting stores and making purchases. This is how traditional retailing still works. It has its own advantages like the element of human touch, physical validation before purchase, in-store shopping experience, etc. Nothing was inherently falling short until eCommerce came with the support of certain technological advancements like smartphones and advanced software for retail commerce. Ecommerce brought benefits which are hard for traditional retail to offer in their known form. For example, eCommerce allows customers to shop from their smartphones from the comfort of their homes. These and many other advantages offered by eCommerce proved to be disruptive for traditional retailers. The obvious course correction indicated going omnichannel.

Going omnichannel constitutes one of the foremost strategies in retail modernisation. Modern-day customers expect the benefits of both online and offline shopping channels. In omnichannel, the shopping journey of customers is woven as one seamless journey while integrating the elements of online and offline channels. By going omnichannel, retailers can build connections with modern-day customers, offer better customer experience, forge stronger CRM, and increase loyalty. Omnichannel retailers also experience higher sales and revenue because of their ability to reach out to online customers while making it easier for customers to buy products online in addition to from their stores. Omnichannel also allows retailers in certain segments like FMCG to make significant savings on big cost heads like leases and rentals by emphasising more on their online storefronts and building robust order fulfilment systems. Another feature of retail modernisation is the use of data analytics. Omnichannel business systems allow the generation of tons of business data that could be used for meaningful business purposes like personalisation, merchandising, and inventory management.

Digital Marketing

In today’s digital era, customers expect businesses to have an online presence. Of course, this online presence means different things to different businesses. A big brand will have an online presence on almost all relevant platforms but for a small business, a listing on Google with the necessary details and some additional features like reviews will suffice. What has become challenging is making that simple presence easily visible to customers itself has become a competitive space called digital marketing. Done right, it offers a host of benefits to retail businesses.

Digital marketing allows retailers to come to the notice of a bigger pool of audiences than traditional mediums like print advertising or television commercials, which are powerful but not specific in terms of whom the ads are shown to. On the other hand, digital marketing focuses on specific segments that might look out for or are actively searching for the products and services in question.

Speed and measurability are two significant advantages of digital marketing. It takes only a few minutes to share content with audiences whose number could be hundreds, thousands, millions, or even more. Digital marketing also allows tracking the performance of promotional campaigns, controlling, and measuring return on investment (ROI).

Technology

When talking about modernisation, it is hard to exclude technology from the party. The two areas of retail modernisation discussed above – omnichannel and digital marketing, are possible because of technology. There are many more areas of retail business management where technology is already playing an indispensable part. Advanced concepts like AI and IoT can be left out of this discussion because the focus is on the first leap from traditional to modern retailing.

Integrated retail store management software is a good example to elaborate this point. These software packages come with many business functions integrated into one. These platforms offer an extensive range of features encompassing inventory management, CRM, reporting, staff management, and other basic and advanced solutions. There are different solutions in the market with different features. Many of these products can also be customised based on business volume, complexity of business processes, number of sales channels, level of support needed, etc. Retailers can also opt for products that are tailor-made for omnichannel retailing. These integrated products are ideal for micro and small retail businesses looking to hop on to the technology bandwagon and reap the benefits of digitisation of their business. Other simple adaptations include POS systems, and modern-day online payment solutions like UPI, barcode scanners, etc. With business growth and expansion, retailers can level up the use of technology.

In-Store Shopping Experience

Having online sales channels does not mean that the element of the in-store shopping experience could be allowed to take the back seat. Traditional retailers have a big advantage over only-online retailers in this regard. They already have a physical storefront that could be used as a platform to send strong brand messages to existing and new customers and encourage them to stay loyal. This is where the in-store shopping experience becomes such a powerful tool in the hands of brick-and-mortar retailers. It can be used not only to showcase modernisation but also to become competitive and keep re-yielding the advantages of store-based shopping. Some of the areas of importance in improving in-store shopping experience for customers are highlighted below.

The visual appeal of a store is something retailers should emphasise on priority. This includes both the inside of a store and the external view of the storefront. If the external view is not up to mark, the internal appearance may not get the chance for appreciation by customers. Coming to the inside, the overall store atmosphere should get the priority first. Details can come later, but the overall first-shot image our eyes catch can mould our impressions in strong ways. Doing badly here means the other smaller components will have to work hard to turn the winds.

As retail consultants for 10+ years, we cannot stress more on the significance of customer support function in any business. In retail stores, the security guards and sales executives are the first point of contact for customers. In retail, employees should not only be professional but also courteous. They should be specially trained to handle off-routine situations. Retail is a tough job so employees’ physical and emotional health should be also taken into consideration while framing expectations from them. For example, there should be sitting and resting arrangements for store employees even during working hours. This is also where different retail automation solutions fit in.

Improve the quality of operations

Operation planning is important not just for modernisation but also for properly running a business in its existing state. As experienced retail and eCommerce consultants, we see improving the quality of operations by itself qualifies as retail modernisation or retail transformation in several ways. Some of the important steps/strategies to improve the quality of retail operations are explained below.

The first step is to have a look at all the business processes that are currently being carried out. Classifying and mapping these processes is important to have an organised view and bring improvements to them later. This mapping helps to assess the significance and requirements of each process and their contributions to the functional and overall business objectives and strategies. Carrying out as-is process analysis helps to examine each process in detail in terms of objectives, procedures, standards of input and output, and other operational standards and requirements.

The next step is carrying out a process gap analysis to detect the aberrations in the current ways of working. The existing practices are compared against the process requirements identified earlier. The ultimate goal is to find and implement correction measures for closing these aberrations.

The third step is to craft the processes based on the specifications identified in the as-is analysis and process gap analysis. One of the best tools for process design is Standard Operating Procedure or SOP. An SOP is a map of work comprising of what needs to be done and how to complete a process or operation. In SOPs, tasks or activities are defined in terms of who, what, where, when and how. It brings clarity and detail to how a task should be done. SOPs serve as operational roadmaps for employees and make supervising, monitoring, and reporting easier.

After the right process descriptions are available, the next ideal step towards achieving process improvement is process automation. Automation not only gives speed to business operations but also makes them more adept and accurate. It allows retailers to handle more volume.

Providing training to employees is also a critical requirement in improving the quality of operations.

Focus on Sustainability

Modernisation is also about adaptation. On this front, sustainability is emerging as an influential factor in shaping customers’ preference for brands, products and services. While it may not apply to all, there is a fast-growing segment of customers who value sustainability and pro-environment measures by brands and businesses.

Retailers can focus on sustainability in numerous ways. They can consider choosing products manufactured using recycled materials or materials procured from sustainable sources. Implementing rainwater harvesting systems could be an innovative and useful approach. Rewarding customers for opting sustainable options is also another option. Retailers can also focus on addressing any local-level concern in suitable ways.

Recap

Africa is on the verge of becoming the next big retail market in a few years from now. New shopping malls are coming up housing prominent local, domestic, and international brands. The rise of eCommerce is undeniable in the African continent. Africa’s growing middle-class population is providing eCommerce players the room to offer a wide variety of merchandise that goes beyond essentials. The growth of eCommerce has elevated the discernment of customers towards value, price, and quality. In view of these and other related developments, it has become important for retail brands and businesses in the region to gear up to this market opportunity coming straight towards them. Retail modernisation could help them with this.  

Going omnichannel is one of the leading moves towards retail modernisation as present-day customers expect the boons of both online and offline shopping channels. Today, customers also expect businesses to have an online presence and done right, digital marketing allows retailers to come to the notice of a bigger pool of audiences than traditional mediums.

Technology has a big role to play in both marketing and operations designed for modern retailing. Improving the quality of operations by itself qualifies as modernisation in several ways.

The element of the in-store shopping experience can be used by retailers not only to show modernisation but also to become competitive and keep harvesting the benefits of store-based shopping.

Retailers must also focus more on sustainability. The environmental concerns are real. There is a fast-growing segment of customers that values sustainability and pro-environment measures by retail brands.

For business solutions and services on retail modernisation or to speak to one of our expert omnichannel consultants, please drop us a message and we will reach out to you.