Nigeria Retail – The Exit Of A Giant

Nigeria Retail – The Exit Of A Giant

 

The Agonies of A Retail Giant

“Almost impossible for any foreign company to do business there. Companies never know where they stand with the authorities and there are constant disruptions and distractions.”

Africa’s retail giant Shoprite has declared it is leaving Nigeria 15 years after it began operation in Africa’s most populous country. This is how the news was received in South Africa:

“Good riddance to Nigeria,” said independent investment analyst Christopher Gilmour. “Almost impossible for any foreign company to do business there. Companies never know where they stand with the authorities and there are constant disruptions and distractions.”

A portfolio manager who did not want to be named said that Engelbrecht is delivering on his promises to deleverage the balance sheet and focus on the domestic market, where the retailer continues to trade best.

“Future profits will also improve, given the severance of the lethargic Nigerian arm,” he added

“The market welcomed the potential exit, pushing Shoprite’s shares to their highest in nearly two months. They were up 11.4% by 1214 GMT.”

Shoprite Holdings could become the latest South African retailer to retreat from the Nigeria retail market.

While presenting its operational and voluntary update for 52 weeeks ended June 28, 2020, Africa’s retail giant Shoprite has declared it is leaving Nigeria 15 years after it began operation in Africa’s most populous country.

 

In a statement on Monday, the Cape Town-based retailer said it has begun a formal process to consider the potential sale of all or a majority stake in its supermarkets in Nigeria.

The company said the results for the year do not reflect any of their operations in Nigeria as it will be classified as discontinued operation.

“Following approaches from various potential investors, and in line with our re-evaluation of the group’s operating model in Nigeria, the board has decided to initiate a formal process to consider the potential sale of all, or a majority stake, in Retail Supermarkets Nigeria Limited, a subsidiary of Shoprite International Limited. As such, Retail Supermarkets Nigeria Limited may be classified a discontinued operation when Shoprite reports its result for the year,” the statement read.

The company has been reviewing its long-term options in Africa as currency devaluations, supply issues and low consumer spending in Angola, Nigeria and Zambia have weighed on earnings.

Shoprite, which owns more than 2,800 outlets across Africa, said in a trading update that it was pursuing the sale after reviewing its operating model and receiving approaches from various investors.

 

This is not all together surprising. In 2018, few months after opening its 25th Nigerian store  Shoprite revealed that it will not be opening any more outlets in the country for the time being.

Speaking in 2018, Shoprite CEO Pieter Engelbrecht, “We had to impair four loss-making stores in Nigeria… we have slowed down in terms of our expansion until we get better clarity in terms of banned products and foreign exchange fluctuations.” He added that the chain’s Nigerian supermarkets were currently only carrying “half of our ranges because of the products banned.” The products affected by import bans include rice, flour and frozen meat.

In 2018, there were two main factors behind these restrictions on imports – a shortage of foreign currency and a desire to boost domestic food production. But with domestic production unable to meet demand, smuggling is flourishing and the prices of staple foods rising, it was only a matter of time. The Covid 19 Pandemic may have only added fuel to an already inflamed situation.

 

Shoprite Leaves Nigeria After 15 Years!

Nigeria, Ease of Doing Business and Foreign Investments

If this assessment is anything to go by, the question one would ask is: How have we fared with our ‘Ease of Doing Business’? This certainly is an ominious sign. How many foreign investments do we expect to leave the country, if Shoprite, a retail giant could be thinking of leaving? Nigeria remains the retail giant of Africa with the right indices to thrive and succeed and the future remains bright. A position no analyst has ever disputed. However, what may not be in dispute is that Nigeria is a difficult business terrain. – “Almost impossible for any foreign company to do business there. Companies never know where they stand with the authorities and there are constant disruptions and distractions.” 

 

The Emergence of a New Retail Model
Innovation in technology is silently disrupting retail business model and changing the basis of competition. Welcome to the new normal. Welcome to a future where shopping will be largely online – ecommerce and mobile and stores become the new fulfilment centers for BOPIS model of operation, or from where products purchased online are delivered to customers. SMART RETAIL. SMART SHOPPING.
The era of big Brick and Mortar stores may just be coming to an end. Investing in big supermarket models may not have a place in the emerging new retail business models in Nigeria. Neigbhourhood malls and corner stores is emerging to be the new normal and the winner.
In fact, Since 2014, for those who have been following Bervidson Group, the leading retail and SME consulting, training and development group in Nigeria and her annual retail leaders event, The Retail Leaders Conference (TRLC), the Group have consistely advocated and encouraged retailers in the country to innovate their operations or perish.
Speaking with the Group’s President, Joseph Ebata today in Lagos,  he maintained that retailers should embrace omni-channel to survive the oncoming onsluaght and that this was just the beginning. According to him
“a single retail strategy is no longer a winning strategy. We strongly advocate that businesses, particularly brick and mortar retailers should get online and do so very fast. They should maintain a web presence, embrace ecommerce and mobile commerce as part of their new retail strategy if they desire to survive, thrive and be relevant in the emerging business landscape.” At our free webinar session early last month, we were very strong on this position. We have since created two platforms Bhosting Solutions and and Bedge Concepts to support businesses particularly brick and mortar retailers in achieving this move online seamlessly among our other business support platforms. ‘Blesssed are those who heard our message and did accordingly for now they shall be singing and rejoicing’.” he added.
Speaking further, Ebata said, “we have also been advocating for the development of neigbhourhood malls and modern corner stores in the country as alternative the large Western-styled malls. Imagine for a second that the Western-styled malls are unable to find anchor tenants like Shoprite post Shoprite? Imagine that Shoprite don’t find a buyer? Imagine there is no ‘new Shoprite’! Your guess is as good as mine. With the already challenging occupancy rate, the malls are in big trouble! The era of large retail brick and mortar stores may fast be coming to an end. Welcome to the era of agile neigbhourhood malls and modern corner stores. May be Shoprite saw the hand writing on the wall beyond the ‘harsh’ operating environment being talked about. Who knows!”
Impact of Shoprite Exit
When asked to comment on the exit of Shoprite, Ebata said “this is a wake up call to all. If this do not wake us up, one wonders what will ever wake us up. Our main concern is the implications for the emerging retail sector in Nigeria, retail contribution to GDP and employment and shoppers, all of which have already been most affected by the Covid 19 Pandemic. Potentially, depending on how the exit is managed, Nigeria retail and Nigerians could be biggest gainers and/or loosers. The options are: find the sweet spots, maximize the opportunities and minimize the challenges.  So, where would the sweet spots be? And how can they be maximized?

 

Who will be Nigeria’s Next Retail Giant?

Answering this question, Ebata went thus: ‘Story, Story: Story! Once upon a time, there was a Shoprite!’

According to him, “Who would have imagined that you may never hear: ‘Daddy, please take us to Shoprite’ or ‘Mummy, I want to go to Shoprite’. Who would have imagined a Nigeria without a Shoprite! What will our malls now be called?”

“Well, as the saying goes: One man’s meat, is another man’s ‘Kpomo’. For a start, our malls can now begin to bear the names their father gave to them at birth, at least for the time being, until a new retail giant will arise. Who will be Nigeria’s next retail Giant? The race has already begun. Would it be Amusan’s Persianas or would it be any of the other contenders? Who will be Nigeria’s next retail giant? May the best win.”

News Reporter

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