AT Kearney’s 2nd African Retail Development Index reconfirmed the continent’s retail potential.
Gabon (#1), Botswana (#2) and Angola (#3) in particular provide retailers with diverse options for retail expansion.
Nigeria drops from #2 to #4 it is still a market to consider, while Tanzania leads the pack in East Africa.
The 2015 African Retail Development Index has been released today that reveals the most attractive developing markets across Africa for expansion. It discusses the growth in the middle class in Africa, increased consumerism, the spread of malls, land being taken up for development for retail purposes and Sub-Sahara’s young and connected middle class that is growing fast and still deciding on its favourite brands.
The report reveals :
- The African Retail Landscape – what the retail market in SSA looks like today
- ARDI 2015 ranking incl. South Africa’s ranking and the opportunities for its retailers in the rest of SSA
- Right Approaches to Africa – which countries provide the best opportunities and how does this link to retail maturity stages?
With Sub-Saharan African brimming with potential being one of the few markets with annual GDP growth of more than 5%. AT Kearney’s 2015 African Retail Development Index (ARDI) reconfirms the potential of many nations throughout Africa—not just oft-discussed markets like Nigeria and Ghana, but also small, dynamic markets such as Gabon, the ARDI’s top-ranked market and home to Sub-Saharan Africa’s highest GDP per capita, and also mid-sized and fast-growing countries such as third-ranked Angola.
The report begins with a look at entry strategies for Sub-Saharan Africa, followed by an in-depth analysis of the top 14 countries.
The authors are available this week to share their views of the report & insights on:
- The outlook for the retail sector for 2015/2016
- South Africa’s retail sector vs other emerging markets such as India, Brazil, etc
The 2015 ARDI ranks the top 15 Africa countries according to market attractiveness for retail expansion. The ARDI is a useful framework for retailers because it not only identifies the markets in Africa most attractive for retail expansion today, but those that offer the most potential.
The Index identifies three distinct differences in stages of retail advancement in the Top 15 countries—basic, developing, and mature—with only Southern Africa falling into the mature bracket. They are characterized by having a formal shopping culture, international and growing private label exposure, innovation, and stable and transparent pricing. In this market, the key purchase drivers are convenience and quality.
Mirko Warschun, AT Kearney partner and leader of the firm’s consumer industries and retail practice for Europe, Middle East, and Africa (http://www.atkearney.com), noted that Nigeria (#4) moved down the index, despite its market size and room for growth. “Nigeria has massive room for growth in formal retail with 25 new shopping centres in development,” said Warschun. “True spending, however, remains comparatively low as the ‘true middle class’ is a lot smaller relative to the smaller countries ranked higher.”
With its tremendous potential and strong economic projections, however, Nigeria is still a market to consider.
While Tanzania (#5) has dropped a notch, it was the largest and most stable of the East African Community countries and remained an attractive retail market said Warschun. “Tanzania is in the early stages of development, and therein lies the opportunity,” he said. “This unsaturated market has one of Africa’s fastest growing retail sectors, boosted by new shopping malls.”
Bart Van Dijk, AT Kearney partner and leader of the firm’s consumer industries and retail practice in Africa, said that it was instructive to think of Africa as a set of opportunities that can be augmented and added onto one another, rather than just one singular opportunity. “How you pick among the opportunities depends on your offering,” he said. “Retailers with a basic offering should target the large cities and countries because scale will be important, while retailers with a wider assortment should target higher average income countries including the smaller ones.”
The ARDI is based on four dimensions: market size, market saturation, country risk, and time pressure, and ranks the potential and urgency of moving into each country accordingly.
2015 ARDI Results (see chart)
The ARDI’s top 15 highlights some interesting developments. Two small countries—Gabon and Botswana—are ranked first and second, while Ethiopia, with Africa’s second largest population, barely cracks the top 15. The ARDI report includes a summary of all 15 countries in the Index, recommendations for the Cash and Carry retail model, and commentary on the opportunity presented by the East African Community—Kenya, Tanzania, Uganda, and Rwanda.
The report also provides entry strategy recommendations for each stage—Basic, Developing, and Mature.
Mike Moriarty, AT Kearney partner and leader of the firm’s Global Consumer Institute, concluded, “Success in Africa requires analysis, understanding, and the flexibility to customize, but for those willing to take the risk, the rewards are plentiful.