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AFRICAN LIONS GO DIGITAL:
POTENTIAL IN AFRICA
RETAIL IN AFRICA
In these small storefronts and open-air stalls, presentation isn't always key.
Cereal boxes might be covered in dust. You can't find the same article of
clothing in multiple sizes. Glassware isn't sold in complete sets. Produce is
not chilled and Prices are negotiable.
Retailers like these serve their purpose well; they are flexible, practical and
cost-effective. But as spending power increases in most of Africa's fastgrowing economies, Western-influenced shopping preferences are
beginning to take hold. For better or for worse, a growing number of
consumers across the continent are gravitating toward a new kind of
consumerism -- one that prioritizes presentation, branding and consistency.
In other words, opportunity is knocking for big-box stores, massive groceries
and multi-story malls. The return on investment could be huge; global
consulting firm McKinsey & Co estimates that by 2030, Africa's top 18 cities
will have total spending power of $1.3 trillion. For Western retailers, this
could be the beginning of a new golden age in Africa.
RETAIL GETTING IN SHAPE IN AFRICA
• Africa is a continent best known for its resources. Oil is abundant in
places like Nigeria and Angola; natural gas is booming in Tanzania and
Mozambique; minerals enrich the earth in Botswana, the Democratic
Republic of the Congo and South Africa. The growth these
commodities have spurred is incredible; the IMF estimates that GDP
growth in sub-Saharan Africa will hit an average 6.1 percent next year,
far exceeding the expected global average rate of 4 percent.
• The trend is most evident in fast-growing business hubs like Accra,
Ghana; Lagos, Nigeria and Nairobi, Kenya. These densely populated
and relatively high-income areas are full of consumers with limited
shopping options -- and outside investors have noticed.
• There is a sizeable part of the population that has the means to buy
from formal shops, but don’t have the options available. There is plenty
of interest in Africa.
RETAIL PLAYER ENTERING AFRICA
• The American retail behemoth Wal-Mart acquired a 51 percent stake in
South African wholesaler Massmart last year, which it is using as a
springboard for expansion into the sub-Saharan market. Massmart will test
the waters by opening a single store in West Africa by the end of 2013, and
has plans to open 90 stores across the continent in the next three years.
• The French retail giant Carrefour has partnered with the French distributor
which specializes in African sales and distribution, and plans to open
stores in eight countries across the continent by 2015.
• South Africa's Shoprite ,a food retailer, has allocated more then $200
million to build stores in Nigeria.
• Atterbury Group, a property holdings and investment group in Pretoria,
bought majority shares in Accra Mall, Ghana's biggest retail center, last
year and has plans to open up an even bigger mall in the same city.
INTERNET IMPACT ON ASPIRING
The Internet today connects about two billion people worldwide. Half of these are in the “aspiring” world—countries
that are climbing the developmental ladder quickly, with diverse populations and inarguable economic potentialities.
• The Internet is growing at a tremendous rate in aspiring countries, but with very different growth paths. Internet
penetration has grown at 25 percent per year for the past 5 years in the 30 aspiring countries, compared with 5
percent per year in developed countries. Many Internet users in aspiring countries are gaining access to the
Internet solely through mobile phones. Mobile subscriptions in aspiring countries have increased from 53 percent
of worldwide mobile subscriptions in 2005 to 73 percent in 2010.
• The impact of the Internet in aspiring countries has been significant, but there is still tremendous potential if
these countries reach developed world levels. The Internet contributes an average 1.9 percent of GDP in aspiring
countries—$366 billion in 2010. By comparison, the Internet in developed countries contributes an average 3.4
percent of GDP. Today, consumer surplus is between $9 and $26 per user per month in the nine aspiring countries,
much lower than the $18 to $28 per user per month we have seen in developed economies.
• Individuals in aspiring countries have utilized the Internet in significant and dynamic ways. Individuals have often
been the first to benefit from the Internet in aspiring countries, mostly through free services such as e-mail, social
networks, and search engines. The younger half of the population drives the adoption of online services, and the
level of their engagement with certain online activities, such as social networking, often exceeds that of their
developed country counterparts.
• Entrepreneurs in aspiring countries have thrived despite Internet ecosystem constraints. Entrepreneurs in
aspiring countries are often effectively social entrepreneurs, as they help to build a robust Internet ecosystem.
Entrepreneurs have had to innovate, creating new business models that enable users to overcome local
constraints, such as offering payment for online purchases upon physical delivery or using mobile accounts instead
of credit cards.
THE INTERNET IN AFRICA TODAY
16% INTERNET PENETRATION.
167 MILLION INTERNET USERS.
67 MILLION SMARTPHONES.
MORE THAN 50% OF URBAN RESIDENT ARE ONLINE.
18 BILLION DOLLARS INTERNET CONTRIBUTION TO GDP.
POTENTIAL BY 2025
50 % INTERNET PENETRATION.
600 MILLION INTERNET USERS.
360 MILLION SMARTPHONES.
75 BILLION DOLLARS IN ANNUAL ECOMMERCE SALES.
300 BILLION DOLLARS INTERNET CONTRIBUTION TO GDP.
300 BILLION DOLLARS PRODUCTIVITY GAIN IN KEY SECTORS.
OPPORTUNITIES FOR INTERNET–DRIVEN
GROWTH & PRODUCTIVITY IN SIX SECTORS.
• FINANCIAL SERVICES
• The formal retail sector is relatively underdeveloped across most of the
continent, outside of South Africa. But the advent of e-commerce is opening up
a new shopping experience for the growing middle class.
• It promises to deliver access to a far wider selection of goods, with better
quality, convenience, and lower prices.
• The Internet will make it possible for customers to take control of their
shopping experience, from search through to delivery and payment. This could
create far greater impact in the lives of African consumers than it has in the
developed world, which was already well covered by modern retail.
• E-commerce is still relatively new on the continent; less than 15 percent of
urban Internet users shop online. However, a number of online operations are
already innovating to address challenges with logistics and payments.
CHALLENGES IN ECOMMERCE RETAIL IN
Logistics and delivery infrastructure. While some major urban centres are well-served by
logistics companies, many Africans live in informal or rural settlements that lack clear addresses.
(Even in urban centres, existing logistics solutions may not be cost-effective, leading retailers to
develop their own services.) Some of those attempting to serve informal or rural communities have
developed models that including delivering to the closest identifiable address, with delivery time and
place arranged by phone. They also allow customers to pick up products at their warehouses. In
addition, players have created their own delivery functions to guarantee delivery service levels.
A poorly developed payments industry and low banking penetration. The lack of financial
infrastructure makes cashless payments difficult to establish at scale, though mobile banking could
provide a solution to this challenge (as discussed earlier in this chapter). To solve this problem,
many e-tailers are using cash on delivery and mobile money payments. Some players allow
customers to deposit cash at bank branches or pay at an agent or store counter. Payment issues
are a major hurdle, as current solutions (especially cash on delivery) generate significant cost
Limited consumer awareness. Although e-commerce is resonating with many middle-class
consumers, others lack awareness of online shopping and may be hesitant to trust e-tailers with
payments. To build awareness of their online channels, e-tailers such as Zando and Jumia have
created a physical presence at markets and malls, offering free Wi-Fi in return for customer data
and establishing a physical sales force armed with tablets that will walk consumers through the
online experience, even identifying items to order later by text message or phone.
ANTICIPATION BY 2025 FOR AFRICAN ECOMMERCE
By 2025, e-commerce could account for 10 percent of retail sales in
Africa’s largest economies. This would translate into some $75 billion
in annual online sales and advertising revenue. At the same time, the
Internet will enable substantial productivity and efficiency gains in the
retail sector, through cost savings, strengthened supply chains, and
digitized payment collection. The potential technology-related
productivity gains in the retail sector could be worth $16 billion to $23
billion annually by 2025.