What are the biggest challenges for modern retail chains to reach meaningful scale in Nigeria?
ENUNWA: The biggest challenge to reaching scale is a lack of quality retail space due to limited investment by property developers. We have had to build our own retail spaces to address the lack of supply, rendering it difficult to scale since it entails operating beyond one’s core competency. Manpower issues are also a constraint because of the challenge of identifying experienced labour to work in modern stores. This means that we have to develop our own manpower as well, and at a pace that comports with our growth trajectory.
A third hurdle to reaching scale is the local supply chain, the growth of which is limited because of infrastructure issues, including the import regime, the naira’s devaluation and foreign currency shortages, making it difficult for manufacturers and importers to secure raw materials and merchandise.
To what extent has an understanding of the local market catalysed the growth of local retail players?
ENUNWA: Understanding the nuances of the local market is critical. Retail is an inherently localised business, as proven by the dominance of indigenous brands such as Walmart in the US and Tesco in the UK. Local retailers outperform foreign retailers at a ratio of 90 to 10, with traditional retailers such as open-air markets accounting for 95% of the sector. This dominance is informed by an acute knowledge of their customer base, including an awareness of any changes in consumption patterns, as well as an understanding of how to navigate the complexities of the country’s fragmented retail value chain. Access to capital and technology constitute the competitive advantage of foreign retailers, given their proximity to international markets. However, excess capital carries with it significant business risks. The best approach for foreign investors looking to break into the Nigerian retail market is to partner with a local player that already has a proven track record of success.
In what ways can modern retailers catalyse growth by targeting customers beyond tier-one cities?
ENUNWA: Nigeria represents a substantial market given its landmass and population, which is spread across 36 states. Focusing on customers in Lagos and Abuja is reductive since both cities account for less than 10% of the country’s population and 10% of its GDP, leaving 90% of the potential retail market under-served. Lagos in particular is limited as an attractive market due to the high level of saturation. Meanwhile, there are major industries in several cities across the country that have residents with significant spending power and requiring retail services who have largely been overlooked. The potential for growth exists far beyond the traditional demand centres.
How would you assess the impact of e-commerce on the country’s retail sector?
ENUNWA: E-commerce has expanded the physical reach of traditional brick-and-mortar stores without the associated costs, especially if they have a well-designed e-commerce platform. E-commerce has affected specific retail categories, such as travel and electronic consumer goods, due to superior efficiency and convenience. While e-commerce may be conducive for customers in need of particular fast-moving consumer goods, its overall impact on grocery retail has been negligible, partly due to the difficulty of replicating the physical experience, as the emotive and tactile experience of physical retail often translates to elevated sales.
Nevertheless, digitisation has been critical to retail for decades. Harnessing the power of data is likely to be the foundation of the next frontier in retail transformation. This requires an understanding of how to capture, interpret and use data responsibly to create a unique consumer experience. We have seen the use of data evolve from facilitating basic enterprise functions, such as tracking sales and inventory, to boosting predictive capabilities to meet the demands of customers.
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