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Tuesday, 4 August 2020

‘Why Shoprite is quitting Nigeria’s retail market’ - Exclusive Report


[The Guardian, Nigeria] - While the announcement of the imminent exit of South Africa’s retail giant, Shoprite, from Nigeria may have come to many as a surprise, available data have shown that weakness in purchasing power, foreign exchange hitches and intense competition were some of the major factors that informed the decision, if the firm’s scorecard for the year ended June 28, 2020 was anything to go by.


Also, the supermarket’s non-South African segment had also been experiencing currency devaluations. For Nigeria, the naira depreciated from N360 pre-COVID to N460 in June before hitting its current N475 to the United States dollar.
While the company was believed to be doing well in terms of local currency, it was, however, haemorrhaging on the foreign front, as exchange rates kept undermining its financial status.
Already, an insider told The Guardian that the main challenges were forex volatilities and high cost of doing business in the most populous black nation, adding that the new deal would be structured in a way that encourages emergence of more franchisees and deters monopoly.
Although the brand could be retained, the source noted that while Artee Group, the owners of SPAR Nigeria licence might get the majority shareholding in the proposed mart, the deal, is however, open to as many willing rich Nigerians and investors.
Besides the fact that the superstore caters mostly for the middle class in a conducive environment, a decline in earnings and household incomes as well as growth in rival brands like Supersaver, Ebeano, D’Prince, Hubmart, Spar and others had diminished its market share.
Also in the exit drama is another South Africa’s retailer, Mr. Price, which has said it wanted to focus on its home country’s domestic market’s largest economy.
With lower returns and rising unemployment, many fast moving consumer goods companies (FMCGs) have developed business models that leverage the efficiency of the informal markets to push their products instead of keeping them on the shelf.
Shoprite opened its first store in Nigeria in December 2005 and now has 26 of them across eight states, including the Federal Capital Territory (FCT).
It also claimed to have employed more than 2,000 persons, 99 per cent of them, which are allegedly Nigerians.
The closure could affect over 300 value chain operators and suppliers.
Having spent 15 years in the country, Shoprite Holdings Limited claimed customers’ visits for the year dipped by 7.4 per cent due to the COVID-19 lockdowns.
It added that outside South Africa, sales only increased by 0.1 per cent, while it recorded an auction decrease of 1.4 per cent for the year.
According to the report, the non-South Africa operation, excluding Nigeria, contributed a paltry 11.6 per cent to the group’s sales.

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