Retail industry in Africa offers huge potential, say experts

The retail industry in Africa offers a huge potential because of a growing middle class and a growth in GDP, this is according to financial and economic experts.

According to Deloitte, Africa's middle class has tripled over the last 30 years, and the current trajectory suggests that the African middle class will grow to 1.1 billion in 2060, making it the world's fastest growing continent.

This growth, coupled with the forecasted GDP growth of over 6% which the International Monetary Fund (IMF) is predicting, drives the potential for retail growth on the continent significantly through increased purchasing power and consumer demand.

DHL Express Africa’s Head of Marketing for Sub-Saharan Africa, Sumesh Rahavendra, says retail expansion will be key to its business strategy so as to capitalize on these emerging realities. A recently released A.T Kearney African Retail Development Index further validates the company's plans as it ranked the top 10 countries in Sub-Saharan Africa for retail expansion. Rwanda, Nigeria, Namibia, Tanzania and Gabon are Africa's most attractive markets for retailers looking to expand.

The growth of ecommerce and access to technology has further upended the traditional shopping experience for consumers, and retailers are increasingly beginning to maximize the opportunities arising from the growing number of digitally-empowered consumers, who are opting to purchase goods via ecommerce channels

"We are now in a position to directly relate growth in our retail footprint to growth in our earnings so we know the potential is huge," says Rahavendra.

According to the index, African retailers such as South Africa's Shoprite, which operates in more than 16 African countries, and Nakumatt, which is based in Kenya and has stores in neighbouring Uganda, Rwanda, and Tanzania, have done most of the expansion, but global retailers are moving in. In 2011, Wal-Mart acquired South Africa's Massmart, and it plans to open 90 supermarkets across Africa over the next three years.

DHL Express, who has a retail presence in over 2400 outlets across Africa, says it will continue its aggressive expansion strategy in Africa in 2014.

"We have made great progress in making the global market and world at large more accessible and connected by increasing the number of points where customers can access DHL and our global network. This allows anyone - from a student to a small business - to access over 220 countries and destinations that we serve," says Rahavendra.

Key retail markets for DHL currently are Nigeria, South Africa, Kenya, Tanzania, Uganda, Ghana, Senegal, Côte d'Ivoire, DRC, Zambia and Zimbabwe.

Rahavendra says supply chains in Africa are more challenging than many other markets in the world, and that the key to success is to understand the challenges in order to offset the risks versus the opportunity which the continent offers.

He says that knowledge will allow retailers to service markets with a supply chain that is agile enough to respond quickly to sudden or unexpected changes, flexible enough to customize products and efficient enough to protect margins.

“We have been active on the continent for over 36 years, and being the only international express company to operate our own airline and extensive infrastructure throughout Africa, we are well positioned to connect Africa with the world," he says.