Trends shaping the African retail sector in 2021
The African retail sector has grown tremendously over the last few years. This continent is home to more than one billion people, which is expected to increase to more than two billion by 2050. It also has the youngest population, with 226 million people aged between 15 and 25 years in 2016, according to World Bank estimates. Africa has the fastest rate of urbanization in the world. More than 40% of its population is currently living in urban centres. By 2030, Africa’s 18 largest cities will have a combined spending power of $1.3 trillion. Additionally, Africa has as many cities with one million inhabitants as North America.
Moreover, Africa is on track to become the continent with the world’s youngest population. Approximately 70% of Africans are presently under the age of 30. Youth account for around 20% of the population. Fifty three percent of African income earners are between 16 – 34 years old. This is an age group known for their awareness of and eagerness to consume new products.
A growing population and larger cities translate into big opportunities for retail. For instance, wholesale and retail are already the 3rd largest contributor to Nigeria’s GDP and more than 90% of the sector is made up of informal retailers. Kenya has seen a 54% growth in its number of stores over the last five years. South Africa has almost 2,000 shopping malls covering over 24 million square meters. With a surge of investment in technology and infrastructure, Johannesburg is poised to become “Africa’s hippest city.” The newly revitalized neighbourhood of Maboneng boasts trendy restaurants, luxury hotels, and galleries.
The onset of the COVID 19 pandemic last year completely upended all expectations across all global markets for the year. Stores were forced closed; employees were furloughed or laid off, rent was skipped, supply chains were strained. The African retail sector in 2021 may have survived the worst of the pandemic, but its fallouts are still very much present and will continue to shape the current business year. Indeed, the ability of the crisis to cause more problems or abate them, depending on how the world recovers, will perhaps have the largest effect on the industry this year.
Even today, the pandemic ravages almost every global industry, in some cases speeding up inevitable changes while in others sparking unexpected developments. Whatever this year brings, the changes driven by the convergence of the pandemic and the harsh realities of doing business in Africa will influence what African retailers will do this year to reshape the African retail industry.
Emerging technologies, a booming population, and rapidly developing economies are changing the retail landscape of Africa. Below are some interesting trends already shaping the future of the African retail sector in 2021:
1.The Establishment of Faster Delivery Channels In Retail
The pandemic has made more customers rely solely on the delivery efficiency of the businesses they patronize for access to the goods they’ve already purchased. Same-day shipping isn’t necessarily a new concept — in 2018, 51% of ecommerce retailers already offered same-day delivery — but we’re likely to see it become the norm as the African retail sector evolves this year.
Sales from same-day shipping pioneer Amazon are higher than ever, and this demonstrates to small business owners in Africa that it is past time they improved the efficiency of their delivery channels. This is a crucial trend in the African retail sector this year because customer expectations for shipping times are only getting faster, and shoppers want their orders ASAP.
Same-day, store-fulfilled orders are set to witness more traction from customers particularly as PwC reports that 88% of consumers are willing to pay for same-day or faster delivery. From Amazon’s Prime Air to the rise of quicker deliveries by small businesses in the retail sector, this is one rising trend that seems to have come to stay.
2. The Boom of Social-Commerce
This surge in online shopping- aided in no small measure by this pandemic and the lockdown of physical stores -is here to stay. According to a recent study, in 2020, nearly 41% of customers said they were currently shopping online for things they would normally buy in-store. The impact of this trend will undoubtedly be felt in the African retail sector in 2021, compared to all the past years.
Social commerce is on the rise because it offers shoppers an even more seamless way to shop online. Instead of clicking through to a third-party website, users can make purchases right from the social media app or site. For more context, last year alone, we saw a partnership between TikTok and Shopify, an expansion of Snapchat’s Native Stores for brands, and the introduction of Facebook Shops.
These shops are custom storefronts for small businesses on Instagram and Facebook and African entrepreneurs have begun to jump in on this. Sellers can create collections of featured products, as well as modify the look of their Shop with banners, images, colours, and buttons. The same Shop can be accessed from both Facebook and Instagram, so once it’s set up, sellers have the potential to reach a wide global audience on two platforms.
With all these social commerce innovations, sellers can cater more directly to their audience than they have in the past. All these tell us that this year, we can expect to see social commerce become an even more integral part of the African retails sector, both for sellers and shoppers alike.
3.The growth of e-commerce and its challenges
The pandemic spurred the growing share of sales that e-commerce took by historic numbers last year. The result of continued growth of internet penetration across all African countries is influencing the emergence of new e-commerce platforms and online retailers.
Even in the wake of the pandemic, e-commerce platforms attracted more groups of customers in 2020 and will potentially continue to do so into 2021. Shopping app downloads, for instance, reached 2.8 million on Black Friday — a new single-day record, according to preliminary estimates from Sensor Tower Store Intelligence.
With pandemic measures for safety still in place, store capacities remain limited and small businesses in Africa have no choice but to compete in the e-commerce space. This will in turn foster the growth of this retail trend across the continent and the globe.
4. More informed and healthier consumers
Changes in consumer lifestyles and ambitions are influencing purchasing behaviour and patterns. Africans are becoming more connected to global trends than ever before as a result of growth in internet penetration and travel. For example, in Ghana consumers are increasingly attracted to products that are well packaged and well documented.
This increasing level of discernment is also seen in the quality of goods that consumers expect and their willingness to pay for it. Those that can afford it are also becoming more health-conscious, favouring nutritious and healthy foods. In response, retailers are formulating new products.
5.The Dominance of African Retailers In Domestic Markets
Without a doubt, African brands are becoming dominant players in local markets and expanding their presence across the rest of the continent. Increasingly, there is a growing movement towards local production and this movement is driven by government incentives to boost local manufacturing alongside the need to circumvent import duties, port delays and high transport costs.
The African Retail Sector in 2021 will witness a lot more companies (local and foreign) considering local production options and taking the home brands a lot more seriously. Despite the fact that the African retail sector comes with a plethora of challenges such as power supply problems, high rentals, electricity and labour costs; this year, the dominance of African retail businesses in the continent’s economy is set to grow to astounding heights
6. Surge In The Growth of Mobile Technology
The GSMA association for mobile development noted that three-quarters of the population of Sub-Saharan Africa, or 747 million people, had a SIM connection in 2018. By 2022, Africa’s mobile economy is expected to generate $150 billion in economic value. Moreover, cell phones are central to life in Africa. 96% of web traffic comes from mobile, so brands who want to engage with the African consumer need to remember that they are mobile-first.
African youths are known for embracing technology, and with Africa’s young population, mobile use continues to grow. African mobile users are very comfortable with apps. Consumers have embraced the ‘data exclusive’ world. While some rely on text messages, various other phone users prefer to communicate via instant messaging and social networks than through text messaging and voice calls.
According to this Deloitte survey, one in five surveyed bought products or services with their mobile phone. Paypal and Ipsos, reports that online spending in South Africa alone was expected to reach 53 billion in 2018. Consumers from Nigeria, South Africa, and Kenya counted towards almost half of Africa’s estimated 21 million online shoppers in 2017. This gives you a clear understanding of where this trend is headed this year right?
Conclusion
For much of the previous year and even in the current one, the COVID 19 pandemic has ravaged the planet, held us all ransom and altered ways of life that we considered normal. And like many other industries, the African retail sector has had to adjust to several elements, including COVID, in more ways than one.
This pandemic will continue to reshape the industry and accelerate trends from consumer preferences to industry norms and structures in the year ahead. The African retail sector is set to tap into these and many other novel trends to get back on its feet.
