How the modern retail boom is driving economic growth | The Guardian Nigeria News


Nine years ago, when a McKinsey report predicted a $40 billion growth opportunity in Nigeria’s food and consumer goods sector, the general outlook was for a boom that would benefit all stakeholders. from space.

Riding the winds of a burgeoning middle class, an accelerated compound annual growth rate (CAGR) of real GDP of 7% and rapid urbanization, the idea, particularly within the subsector still fragile form of retail, was that the market was finally coming into its own and could now focus on the serious business of actualizing its potential.

Unfortunately, that didn’t happen.

What no one foresaw was a global economic recession and the COVID-19 pandemic which combined to plunge the national economy into two cycles of recession in six years. The events also claimed a number of stakeholders in the formal retail category, not the least of which was Shoprite, Africa’s largest supermarket chain, which sold its business in Nigeria to investors. local. Other large transnational retailers such as Mr. Price, WoolWorth and Mass Market (owners of the Game brand of retail stores), have also closed their Nigerian operations.

However, as the world recovers from the debilitating effects of the pandemic and the global economy continues on the path to recovery, there may well be cause for optimism again. London-based research firm, Euromonitor, in its report, “Retailing in 2021: The Big Picture,” said the Nigerian consumer goods segment grew 9.3% to a six-year high of 9 .76 trillion naira. Breaking down the figure, the report says that in-store retail accounted for N9.58 trillion of the total while online trade was N178.2 billion. The 2021 Global Retail Development Index also reported a 3% increase in total retail sales valued at $108 million. Back home, the official statistics agency, the National Bureau of Statistics (NBS), noted an 8.62% growth in trade in 2021, a rebound from a six-year recession.

Ultimately, the outlook is good for Nigeria’s consumer goods sector and the long-awaited growth may yet materialize. Which begs the question: what will be the main drivers of the recovery?

Ade Sun-Basorun, Managing Director of FoodCo Nigeria, a leading omnichannel retailer, puts it down to two factors: strong demand for modern retail and the adaptability of operators within the industry. “What we have is a situation in which the consumer class is becoming increasingly sophisticated in its demand for retail services despite economic pressures. They seem to trust modern retail because it offers the aspirational lifestyle they crave. While pricing is an integral part of the modern retail matrix, other factors such as convenience, quality assurance, and product availability also play a key role in sustaining the industry.

“Credit should also go to space operators. The COVID-19 pandemic has presented an unprecedented challenge, particularly in the areas of supply chain disruptions, so much so that the market has been forced to innovate or die. This has motivated industry operators to dig deep to seek profitable strategies and has also forced us to rethink the art and science of digitizing our operations to reduce costs and maximize scarce resources. For example, FoodCo was already thinking about how to deepen our digitization processes, but COVID-19 forced us to accelerate those plans and the gamble paid off,” he said.

Sun-Basorun’s FoodCo is a clear example of the resilience of modern retail in Nigeria. Established 40 years ago as a small fresh produce store, FoodCo is one of the pioneers of formal retail and quick service restaurants in the country. In May this year, the company was ranked among Africa’s fastest growing companies by the Financial Times; the only Nigerian company in the retail sector to make the list. Even at the height of the pandemic, the company continued an ambitious trajectory, doubling its brand footprint.

While FoodCo is one of the oldest operators in the space, it is leading a new era where indigenous regional players like Roban Stores, EveryDay, Market Square, San Husseini and Addide, among others, are rewriting the narrative of the food industry. formal retail in the country, which until then had been dominated by foreign brands.

For Sun-Basorun, the good days for Nigeria’s formal retail ecosystem are just beginning. “We are confident and excited about the future of modern retail in Nigeria. Although we realize that we are far behind some of our contemporaries on the continent, we are encouraged that there is a huge opportunity for us in the market. As long as we continue to connect with the consumer class at the point of their demand, we can reasonably expect aggressive growth in the sector,” he said.

A 2018 report, The Dynamic Customer, estimates that there are up to 53 million people in Nigeria’s consumer class who have the means to support the country’s consumer goods sector. Additionally, McKinsey’s Global Institute report predicts 82% growth in African household consumption from 2020 to 2025 to $2.3 billion. Nigeria, Africa’s largest economy, is expected to play a key role in achieving this growth with spending estimated at $96 billion, the highest on the continent. Food, beverages and other consumer goods are expected to lead the pack.

As other sectors of the Nigerian economy continue to grapple with the aftermath of the economic downturn, the success of the organized retail sector will light their way through these tough times.

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