In spite of the nation’s ailing economy, the retail market has continued to witness increased investment as shown by the rise in the size of portfolios and number of shopping malls and online channels springing up in Nigeria.
Findings by LEADERSHIP Weekend reveal that investment in shopping malls is now estimated to be over N1.5tn, even as investors in hypermarket having Shoprite as one of the anchor tenants would have spent over N354.4bn on only the physical structures of 12 malls between the second quarter of 2015 and early 2018.
The Palms Shopping Mall in Lekki, Lagos is currently undergoing extension with an outlet to be known as the Palm 2 of a 40,000-square retail space, a project which is put at an estimated cost estimated of N50.1bn.
The growth, it was gathered, is in the attempt to satisfy the needs of an emerging middle class, which accounts for approximately 23 per cent of the nation’s roughly 180 million population, estimated to have a combined buying power in excess of N8.5 trillion.
According to statistics from Estate Intel, it costs an average of N1, 253, 245 per square metre to complete a shopping mall in Nigeria, with cost of doing same being a bit higher in Lagos.
The cost involved notwithstanding, Shoprite recently said it was planning to have about 700 outlets in Nigeria in a few years to come. Artee Group, owners of Spar, also hopes to expand the frontiers of its business in Nigeria with about 100 outlets.
This is even as indigenous retailers have also continued to swell their number with names such as Justrite, Addidie, Goodie, Park ‘n Shop, Eneano, Blenco, Bestsavers, Aliba and others that are now changing the shopping experience in Nigeria.
Also, broadband penetration has to a great extent contributed to the growth of supermarket without walls with names like Konga, Jumia, Kaymu, Yudala, Deal Dey, Olx Nigeria, Jiji, Vconnect and many others operating through the online channel delivering goods at buyers’ doorsteps.
“The current status is a journey that has taken these second generation of retailers about 30 years to attain”, John Goldsmith of Artee Group said, while speaking about the growth of hypermarket stores in Nigeria, shortly before the start of holiday sales in a recent year.
A conservative estimate put the number of hypermarkets in Nigeria at 21, each with size at least covering between 10,000 and 40,000 square meters of shop space and parking lot, usually located in the upscale neighborhoods of the cities they are. The Tinapa Shopping Mall alone covers 80,000 square metres.
Goldsmith said as of today, Modern Trade Stores contributes around 2 – 2.5 percent of retail trade in Nigeria vis-à-vis other African countries where Modern Trade Stores’ share of retail sale is much higher. “In Nigeria, being the largest African country in terms of population and economy, we firmly believe that the brick and mortar retailers will continue to grow for years to come”, he added.
One of the challenges of retail industry he identified was that government had so far failed to understand and acknowledge retail as an industry. This has to change because, according to him, retail generates employment and has huge potential to generate huge employment in the coming years.
He said retail has been recognised globally as one of the largest employers of labour and setting up a mall is equivalent or even bigger than setting up a manufacturing factory. Retail is also the conversion point – point of interface between other drivers of economy like manufacturing, real estate, finance and the consumer.
However, many believe that the spread of the big shopping malls is a kind of revolution that may efface the largely unregulated and informal channels of retail mart as the popular names in foreign supermarket chains have continued to spread in the nation’s retail marketing.
These foreign retail franchisees stock wide varieties of consumer goods in larger quantities with cheaper, unbeatable prices in their extra-large, ultra-modern shopping outlets usually characterized by large parking lots, banks and lots of ATMs. In some cases, customers are assured that the deal would be made good if the articles are sold at any cheaper price by other retailers.
Hypermarket stores differentiate themselves as the largest retail store format as opposed to the smaller ones that are in mere supermarket and convenience store format. Hypermarket stores have a wide product assortment ranging from food and grocery, wines and spirits, bakery and butchery, fruits and vegetables, ready meals and snacks, electronics, mobiles phones, IT products, clothing, perfume and watches, gaming products, furniture and many more. In Nigeria, there are only two retail chains operating with hypermarket store format.
However, a Lagos-based public analyst, Henry Boyo, told our correspondent that this trend would only make Nigerian industrialist uncompetitive as government seems to be guarding the foreign retailers. “They have no factories here. They will tell you they are not manufacturers, yet most of the products they stock are not locally made. Economic policy here allows up to 100 percent importation of retail mart and NAFDAC seems less stringent on them than the indigenous retailers”, he said.
The activities of the foreign shopping malls in Nigeria are only helping the supply level of employment of another country, all under the guise of attracting foreign direct investment. “The incursion of the supermarket giants does nobody any good in the long run. They import about 70 or 80 percent of their goods to Nigeria. Except at least 60 percent of articles stocked in these outlets are locally manufactured, we should not be talking of foreign investment”, added Boyo.
Visits to some of the shopping malls around Lagos and the newly opened Palm Shopping Mall, Sango Ota, showed that Nigerians of all social status now throng the malls, especially on weekends. The long lines of shoppers checking out of the malls and the time it took to do so also testify to the fact that hypermarkets are really booming in the country.
It will, however, require effective regulation from the government to check any excesses that may set in from the part of the foreign franchisees. In the same vein, the traditional retailers will need conscientious review of their contents, packaging as well as pricing so as to be relatively competitive in the retail business.
Only then can they withstand the retail giants whose spread and reach pose a threat to the existence of the traditional retailers and key in on the evolving and attractive Nigeria retail market