RESILIENCE

Covid-19 has encouraged Innovation in Africa's retail industry

Africa’s retailers were initially hit hard by the Covid-19 pandemic, but with the help of some innovative thinking they are already bouncing back. We look at six of the trends driving the retail recovery.
3 minutes to read
Categories: Publication Africa Horizons Resilience

  1. TOUCH-FREE SHOPPING

    In a Covid-conscious world, demand has increased for contactless payment and touch-free shopping. While poring through the menu at your favourite restaurant or spending an afternoon in the fitting room formed a big part of the pre-pandemic shopping ritual, retailers are now investing in reinventing the experience.Initiatives such as mobile money payments and trying on clothes virtually, as well as scan-and-go applications, are becoming more prominent across Africa. Retailers such as Woolworths in South Africa have launched contactless drive-through services, allowing shoppers to order online and collect without leaving the car.

    Almost 90% of South Africans have been using contactless methods to pay for groceries, according to a Mastercard survey, while 70% of respondents across the Middle East and Africa indicated they had been using some form of contactless payment since the onset of the pandemic.
     

  2. THE RISE OF THE SUPERMARKET

    Prior to the pandemic, consumers in Africa’s major cities generally preferred local convenience stores to the big box supermarkets. Supermarkets, characterised by neon-lit aisles, well-packaged products and air-conditioned stores, were considered expensive by consumers, with the result that growth throughout the continent has been sporadic.However, social distancing measures and the logistical impact of the pandemic on informal traders has seen a shift in consumer shopping preferences, which has underpinned the rebound of the formal retail sector across the continent.

  3. APPAREL BOUNCES BACK

    Apparel stores were one of the most distressed retail segments across the continent at the onset of the pandemic. This resulted in market exits by retailers such as Mr Price in Nigeria and the collapse of Deacons in east Africa. However, as a result of remote working there has been a shift in demand towards casual clothing and workout apparel.

    Further, the ban on international travel redirected demand towards Africa’s branded fashion retailers. As a result, these retailers tripled their sales turnover compared with pre-Covid levels in cities such as Nairobi, Kampala and Gaborone. This trend is expected to continue to be underpinned by middle- and high-income consumers across the continent in the short to long term.

  4. CLOSER TO YOU – THE SUBURBAN RETAIL BOOM

    Traditionally, retail in African markets has been centralised in and around business districts and inner cities. However, with more consumers working from home and fewer daily trips to downtown nodes, consumers have engaged more with suburban retail, leading to significant growth in turnover in these areas.

    As a result, there has been increased interest and relocation by retailers to suburban areas, creating a broader tenant mix and offering more variety closer to home for consumers. This has served to enhance the shopping experience and cement the role of suburban retail in the future of shopping across Africa.

  5. OMNI-CHANNEL PRESENCE – THE END OF THE DEBATE

    The online versus bricks-and-mortar retail debate has raged on for more than a decade now in sophisticated retail markets. With the anticipated death of the store, major changes in retail strategies and delivery of product to consumers have occurred. 

    While Africa has not been left behind during the debate, digital retail penetration remains insignificant with less than 1% of retail sales being generated online. Lockdowns, therefore, represented an unprecedented opportunity for online retail to gain momentum. 

    While online retail sales did indeed surge during the onset of the pandemic, they have now plummeted with the easing of lockdown restrictions. This highlights the continued relevance of physical stores to African shoppers. The future ecosystem is therefore likely to see omnichannel platforms forming the foundation for retailers with brick-and-mortar stores.

  6. LANDLORD TENANT RELATIONSHIPS – THE NEW NORMAL

    Landlord and tenant relationships have traditionally been transactional in nature. However, lockdowns and the forced closure of businesses due to the pandemic presented a new dynamic for both parties to compromise and collaborate in order to attract and retain consumers. 

    The willingness to make trade-offs, such as the adoption of turnover-based rent models by some, and greater flexibility on lease terms, are anticipated to underscore the new normal in tenancy agreements across the continent, ultimately aligning with international best practice.