Shoprite, Africa’s largest retailer started operations in Nigeria in December, 2005. Since then, the retail giant has gained a large market share of the retail market. This is also indicated by his sales in 2016 with revenue growth of 48.2% YOY and a customer base increase of 38.2% YOY. This figure was welcomed with mixed reactions by analysts who felt this is ironic in a country that was going through a recessional economy. Within the last 12 years, Shoprite has built a brand with 23 stores and another two under construction.
Her success story is traceable to its entry into the country when no other retail chain store had dared one of the largest economies on the continent. It came in with an innovation welcomed by the middle class and the high income earners who saw it as a market of convenience where you can get all you want in a particular spot.
The success of Shoprite is also predicated on Nigeria’s increasing population whose middle class is estimated at 30% of its population. Also, the rate of urbanization in the country and the desire of many state governments to give a face lift to the various state capitals thereby bringing about an organized market rather than the conventional traditional trade are factors that have helped the Shoprite brand. However, this article is to evaluate the consequences of the Shoprite brand and its similar supermarkets on the traditional trade as it has been observed by the market women that any location that Shoprite enters suffers a decline in sales in the traditional trade. The factors that are responsible are highlighted below.
Low Bargaining Power of Suppliers
Shoprite has developed a brand that has resulted in a low bargaining power of its suppliers. This is due to its higher negotiating power and this is because of the high patronage of consumers which it enjoys traceable to a “low price” tag that the retail outlet has been known for. This “low price” is a function of the negotiating power that Shoprite has with its suppliers which makes it negotiate for a lower price. Some years back, in one of my marketing classes, a question was asked about the power of these retail outlets and that is: Is it TESCO (a retail store in the UK) that can do without Coca-cola on its shelf or Coca-cola that can afford to do away with TESCO? It was a difficult question to answer because the answer is based on which brand is more powerful.
Coming back home to Nigeria, Shoprite has been able to ride on the above premise such that companies are concerned that the withdrawal of their products from Shoprite in the face of deadlock in negotiation could give the competitor an opportunity to take up the shelf. This idea has helped Shoprite to continue to enjoy special negotiations from their suppliers. As a result of this, consumer goods are most times cheaper in their stores than in the traditional trade. This has been a major concern for the market women who are close to wherever Shoprite is located. This trend has continued to increase the customer base of Shoprite because the consumer is guaranteed of getting its goods at a competitive price.
“One Stop Shopping”, Convenience and Ambience
Shoprite has been able to maintain a competitive edge over most of its competitors by ensuring that a shopper will get all that he wants in that one outlet. Goods therein range from consumer goods to electronics to perishable goods. This has stopped a lot of shoppers from going to the traditional market where you are not going to enjoy the convenience and ambience that Shoprite offers. In addition is a parking space which is a major challenge in most markets. A lot of shoppers would prefer the convenience they will get in Shoprite as well as the ambience of the stores to going to the traditional market hence increase in traffic to Shoprite and a decrease in traffic in the traditional trade.
However, the question on the lips of an average roadside retailer is the title of this article: “Is Shoprite killing our traditional trade” and the answer to that question is a capital “Yes”. This is because the same way technology is disrupting a lot of activities in several professions is the same way the retail chain supermarket has come to disrupt our traditional way of buying and selling. The obvious is that the traditional market are not making sales again as it used to especially in locations close to where Shoprite or any modern retail outlet is situated. In addition to the impact of the retail chain outlets is the effect of the online stores which are also taken advantage of by the middle class. A consumer will sit in the corner of his home, request for a product online and you get it at your door step. Local market women are hereby advised to search for new opportunities in this ever changing economic environment.
Written by: Oluwole Dada, (Regional Sales Manager at Nestle Nig. Plc; Member, Chartered Institute of Marketing (UK))