South African based chains such as Shoprite, Pick n Pay, Spar and Massmart have been at the forefront of expansion in Africa. Along with large numbers of store openings, many retailers are upgrading current formats, especially in areas where expansion may not necessarily be possible. Retailers are further focussing on supply chain efficiencies to drive distribution as well as price competitiveness.
South Africa continues to see a shift towards modern trade stores, driven by a mixture of push and pull factors. Pull factors include raised value perceptions and wider choice for brands and pricing while push factors include informal trade, which is distrusted and expensive but necessary as well as price dynamics, which are forcing LSM C/Middle LSM away from informal channels.
As a result, the key strategies shoppers implement to overcome these difficulties are channel hopping, shopping off broadsheet and playing the playing the price/gram value equation in store.
South African consumers lower and upper LSMs are spending 70% + of their larger shopper trips in the modern trade. However, the company still finds around 45% spending its smaller/top up shopping trips in the traditional stores - a significantly high percentage.
Kenya shows a similar trend to South Africa on its lower LSMs; however, its upper LSMs spend 95% on bigger shops and 80% on smaller shops in the modern trade. These are significantly higher proportions spent in the modern trade than seen in South Africa
Nigeria still sees a large amount of shopping done within the traditional markets, as to be expected. The lower LSMs spend 59% on bigger shops and 64% on smaller shopping trips in the traditional trade. There is higher penetration of the formal market amongst the upper LSMs within Nigeria, with bigger shops in the modern trade accounting for 61% and smaller shopping trips 46%.
Across countries and LSMs, where consumers choose to shop remains the same: it is based on where they get the best service and best range of brands as well as where they get the best price and payment terms and what is more convenient and closer to home.
For South Africans, when asking consumers where they choose to shop, modern store outlets are being chosen on their best range of brands as well as pricing, across both upper and lower LSMs. Convenience also plays a role, especially amongst the upper LSMs. Traditional stores are chosen mainly because of their location to home for consumers.
In Nigeria, consumers are driven to the local stores for prices and the convenience of being closer to home. They, however, choose to shop in the modern trade for the better range of brands and services offered to them and the price benefit they often receive.
Kenyans are looking for the convenience of being closer to home in traditional stores, whilst in modern stores they are looking for a better range of brands and service and better pricing.
In conclusion, the research found that the formal trade is definitely the way of the future and the retailers are capitalising on this. However, with a shrinking wallet and price sensitive consumer, the competition is likely to be fierce.
