Emergence of shopping malls poses threat to small businesses

Between 2001 and 2004, the retail sector of the Nigerian economy grew by 10 percent per annum. By 2006, the combined contribution to gross domestic product of the retail, wholesale and hospitality industries was 15 percent. However, the nation’s formal retail sector has continued to expand rapidly with strong growth in value sales in 2011, 2012 and 2013.

With a population of over 170 million people, Nigeria has become an investors’ haven, attracting several foreign companies and multinationals with consumers exposed to a wider range of products.

Increasing purchasing power and limitless investment opportunities continue to lure potential investors, foreign and local investors are falling over themselves to set up new ultra-modern shopping malls. Companies that have berthed in Nigeria include Shoprite, Africa’s biggest retailer, Spar, Europe’s largest retail network, etc.

Interestingly, the retail sector is poised to major investments in the months ahead as government continues to step up its campaign on easing of the foreign and domestic direct investment climate.

Advertising, on the other hand, has led to increasingly sophisticated tastes of the upper end of the market, although retailers still find that ‘must-haves’ are in far greater demand than items perceived to be luxury goods. In the cosmetics and toiletries sector, for example, skin- and hair-care lines far outsell deodorants.

In view of this retail revolution, most Nigerians shop at open markets or purchase their goods from traders and street vendors, but city and state governments are seeing the tax benefits of more formalised trading. This, added to the rising expectations of consumers, has led to a modest boom in the development of shopping malls across major cities of the country.

A report titled “Redefining Retail Investment,” published by Jones Lang Lasalle, a multinational financial and professional services company specialising in real estate, shows that the emergence of these shopping centres, which has redefined retail investment, may not only pose a threat to small retail outlets but will see shopping centres dot the landscape.

According to the report, Nigeria, Venezuela, Bangladesh, Algeria, Pakistan, Iraq, and Manyar, are ranked in the frontier markets while South Africa is ranked, alongside Italy, Spain, and the UAE, in the transitional market – which is rated ‘transparent’ on the index.

In the frontier market, to which Nigeria belongs, the report revealed that organised retailing is at an early stage of evolution with the number of modern shopping centres very limited.

“Substantial market opportunities come in tandem with the major challenges that are associated with difficult operating environments, low real estate transparency and high political/economic risk,” the report pointed out.

The emergence of these malls is partly driven by the inexorable growth of the urban middle classes. With regards to the future of shopping centres and retail investment in Sub-Saharan Africa, the report predicts that South African investors or developers in partnership with retailers are likely to accelerate their move across the continent.

As this happens, “The focus will be on Nigeria, the region’s largest consumer market, oil-rich Angola, Ghana and Mozambique, and some of the more stable markets in Southern and Eastern Africa.”

With the nation’s 170 million people playing catch up with the world of consumer products, some small neighbourhood stores, on the precipice of being edged out by international retailers, have adapted to consumer tastes by changing the profile of products they stock as well as the layout and design of their stores.

Traditional grocery retailers have also increased the stock and range of non-grocery items they offer by adding such items as clothes and footwear, consumer electronics and appliances, books, toys, personal and home-care products, as well as household furniture and furnishings. On the other hand, non-grocery retailers have also re-strategised to increase the grocery proportion of items in their stores.

The expansion in the formal retail sector is on the back of Nigeria’s large population, the growth in particular of the urban population, positive macro-economic growth, the drive by some retailers to ‘modernise’ retailing, increase in disposable income among some segments of the population, and a strong appetite for consumer goods among the populace.

The efficiency of the Nigerian retail market, analysts believe, would be reinforced by the rise in mobile technology expected to fuel the country’s integration with the global economy and also help to alleviate some of its challenges of doing business.

With the lifting of the ban on importation of textiles and furniture at the end of 2010 encouraging such retailing in the apparel specialist retailing channel as opposed to informal channels, second hand clothes remains cheap.

In terms of non-store retailing, internet retailing was expected to see strong growth as the number of internet-capable devices is increasing and safety fears are being eased through the availability of trusted internet retailers like Konga and Jumia both of which have established their position in internet retailing, especially in 2013.

Anne Agbaje