Pascal Oparada
A lot has been said about the reason for the exit of the retail store, Shoprite, from the Nigerian market. The retail giant has given reason for divesting its shares from the Nigerian franchise.
According to Shoprite, dwindling fortune caused both by the COVID-19 and the erosion of the Nigerian currency, the Naira are to blame. The company said it had taken the decision after potential investors indicated interest to buy its stakes in the Nigerian franchise.
Shoprite Nigeria operates about 26 outlets across the country and employs about 2000 employees who are 99% Nigerians. A divestment means it will sell its holdings to another investor who will continue to run the business.
But Shoprite is not the only brand to pack up and leave the shores of Nigeria due to stifling economic environment.
In 2018, Burger King, the world’s second-largest quick-service restaurant tried to make an entry into the Nigerian market. The company said it had studied the Nigerian market for long and would want to enter.
Burger King is yet to show up in Nigeria as per its promise. The same goes for Walmart, the biggest retail store in the world. Walmart came to study the retail store landscape in Lagos and promised to make an inroad, but couldn’t because the political dynamics of 2019 turned things against it.
Business dynamics have changed. Many blamed the exit of Shoprite to the weak Naira and the bad business climate in the country.
Shoprite’s explanation of its intention to divest from its Nigerian operations appears to be anchored on its investment expectation and operating environment. However, there could be more to it.
Nigeria is a highly competitive environment and retail business is about the survival of the fittest. Following Shoprite’s foray into Nigeria in 2002, the retail chain disrupted Nigeria’s retail space giving ordinary Nigerians a taste of what it feels to shop with family and friends. But the fairy tale was not going to last forever. Previous retail outlets like Park n Shop rebranded and injected significant funds in their operations and business expansion. Park n Shop rebranded to Spar and has 14 outlets across the country. It only makes sense for them to divest having held on to the Nigerian operations for almost two decades.
Shoprite also competes with homegrown retail outlets especially in Nigeria’s commercial city, Lagos. Retail outlets like Ebeano, Citydia, and Adidde are becoming household names and expanding rapidly across the state. There are also several neighbourhood supermarkets in the nooks and crannies of Nigeria’s commercial capital piling pressure on Shoprite’s market share. Shoprite does not disclose revenues from its Nigerian operations.
Online shopping has grown since COVID-19 hit Nigeria. Jumia, one of Nigeria’s largest online retail outlets, revealed lower earnings in the first quarter of 2020. However, the company is optimistic of higher revenue growth in Q2, on the back of the COVID-19 lockdowns. Jumia had earlier noted that “we are seeing unprecedented demand to join the Jumia platform, especially for famous brands. We believe those dynamics will help accelerate the shift toward online.”
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The same goes for other online shops like Konga and OMall, who said they saw 45 and 35 per cent growth during the pandemic.
As internet penetration widens and becomes cheaper in Nigeria, the vast majority of Nigerians have resorted to shopping online for such mundane things as groceries.
Failure of Shoprite to envisage the changing dynamics accounts for its low sales. It stood the best chance of succeeding had it pivoted to online.
To really survive in an environment like Nigeria, innovation and understanding the changing tides are the clues
