Rwanda, Nigeria,
Namibia, Tanzania and Gabon occupied the top five places of the inaugural A.T.
Kearney African Retail Development Index (ARDI), a new study designed to help
large, organized retailers determine where and how to best enter Sub-Saharan
Africa's rapidly growing retail market. 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 in the
future.
"Formal" retail, that which
takes place in malls, shopping centers, and other defined trade areas, remains
in the nascent stages in most Sub-Saharan Africa countries, limited primarily
to a handful of urban areas. Low rates of formal retail coupled with increasing
urbanization and the relative stability of many African economies represents
massive room for retail growth.
This first edition of the retail
index for Sub-Saharan countries represents a valuable tool for retailers in the
Middle East to understand the opportunity in Africa. A segmented approach to
the markets is critical to identify the few spots where investment is already
attractive vs. countries or cities at an earlier stage of development that
require monitoring.
Emanuele Savona, Principal at A.T. Kearney
Middle East, commented: "Africa represents a development area for
Middle-East retailers. Since retail and consumer brands are not yet well
established in many African countries, there is an opportunity to benefit the
first mover advantage if retailers in the region select the right formats that
can match the needs of the growing African middle class. In addition, the large
presence of traditional small stores creates an additional opportunity for
retailers that want to introduce Cash & Carry formats to provide a 'one-stop-shop',
stable purchasing offering at competitive prices."
ARDI
Results
The ARDI is based on four elements: Market
Size, Market Saturation, Country Risk and Time Pressure, and ranks the
potential and urgency of moving into each country accordingly. The top 10
markets in the Index are segmented into three high level approaches: Start with
the Basics, Move Quickly and Differentiate.
Start with the Basics: The vast
majority of Africa, including Rwanda, Tanzania, Ghana, Mozambique and Ethiopia,
has limited market saturation, but also low maturity. While these markets are
promising because of favorable demographics and recent growth trends, the main
retail markets remain small, scattered and informal. The largest opportunities
available in these markets revolve around offering basic consumer packaged
products at low prices.
Move Quickly: The countries in this
group - currently only Nigeria and Gabon from our Top 10 - have rapidly
evolving retail dynamics and demographics, with some established retail players
and many other global retailers planning entries. There is no time to spare
entering these markets before these first movers gain an advantage as they
establish their brands early and secure loyal customer bases.
Differentiate: These markets
(Botswana, Namibia and South Africa) have Africa's most advanced retail sectors
as well as an existing presence of international retailers. These markets offer
opportunities for retailers that have the capability to deliver differentiated
products or formats that are hard to find and appeal to a growing middle class
and globally minded citizens.
Bart van Dijk, A.T. Kearney partner
and ARDI co-author noted, "There are wide differences in infrastructure
and supply chain development across African countries. Understanding the
opportunities and limitations from country to country is a critical element of
the retail expansion decision."
By 2020, nearly half of all Africans
will be living in cities. As disposable incomes rise, consumer spending will
grow to almost $1 trillion. Even with the challenges of entering and succeeding
in Africa, the opportunity is impossible to ignore.
"Although there are many
challenges, Africa has reached a point in its economic development where global
retailers must evaluate the significant potential for growth in this
market," noted A.T. Kearney partner and ARDI co-author Mike Moriarty.
The 2014 Africa Retail Development
Index Ranking and Recommended Approach
Index
Rank
|
Country
|
How
to approach
|
1
|
Rwanda
|
Start with the basics
|
2
|
Nigeria
|
Move quickly
|
3
|
Namibia
|
Differentiate
|
4
|
Tanzania
|
Start with the basics
|
5
|
Gabon
|
Move quickly
|
6
|
Ghana
|
Start with the basics
|
7
|
South Africa
|
Differentiate
|
8
|
Botswana
|
Differentiate
|
9
|
Mozambique
|
Start with the basics
|
10
|
Ethiopia
|
Start with the basics
|
About the Study
The Africa Retail
Development Index ranks Sub-Saharan Africa countries on a 0-to-100 point scale:
the higher the ranking, the higher the potential and urgency to enter the
country. The countries considered for the rankings were pre-selected based on
three criteria - a country risk of 35 or higher in the Euro money country-risk
score, population size greater than 1.5 million, and GDP per capita (PPP) of
more than $1,000. The ARDI scores are based on Country and Business Risk (25
percent), Market Size (25 percent), Market Saturation (25 percent), and Time
Pressure (25 percent).
About A.T. Kearney
A.T. Kearney is a
global team of forward-thinking partners that delivers immediate impact and
growing advantage for its clients. We are passionate problem solvers who excel
in collaborating across borders to co-create and realize elegantly simple,
practical, and sustainable results. Since 1926, we have been trusted advisors
on the most mission-critical issues to the world's leading organizations across
all major industries and service sectors. A.T. Kearney has 58 offices located
in major business centers across 40 countries. From our Middle East offices in
Abu Dhabi, Bahrain, Dubai and Riyadh, A.T. Kearney supports both private and
public sector clients as well as nations to excel and prosper by combining our
regional expertise and global business insights to achieve results. For more
information, visit www.middle-east.atkearney.com.
About the A.T.
Kearney Global Consumer Institute
The A.T. Kearney Global Consumer
Institute is a worldwide network of professionals and executives. The Institute
combines proprietary and public data resources with local knowledge to deliver
strategic and operational insights to executives in consumer-facing industries
seeking long-term growth and competitive advantage. For more information,
please contact gci@atkearney.com.
© Press Release 2014