Interview: Ramesh Sadhwani
What are the majors drivers of growth in the retail sector, and what key challenges does it faces?
RAMESH SADHWANI: The main factors influencing growth in the country’s retail market include rapid urbanisation, rising household incomes, and changes in lifestyles and habits across the country. The growing middle class has contributed to an increased appetite for essential goods, including high-value products and brands.
However, one of the main obstacles facing large firms in Ghana’s retail sector is the high cost of freight charges in comparison to other nations in the subregion. In addition, the country’s deficit of retail infrastructure, and a shortage of skilled labour in customer service, hospitality and retail management, are some of the challenges confronting the sector. This skills gap could be rectified by emphasising key disciplines relevant to the industry to make highly skilled employees readily available. Expanding the tax net within the industry to include significant players along the value chain could boost the government’s revenue mobilisation.
Ghana’s retail industry is set to continue developing. With organised retail accounting for about 8% of Ghana’s total retail market but expected to increase exponentially over the next few years, the sector is anticipated to expand further. Other aspects of the industry, such as delivery and online businesses, are now some of the country’s fastest-growing segments. Large retail firms are leveraging technology to develop online platforms as a way of interacting more closely with their customers and meeting demand more effectively.
How have currency depreciation and inflation since the start of 2022 impacted the retail sector?
SADHWANI: Inflation contributed to higher costs and a reduction in purchasing power, which affected sales volumes for most retail outlets in Ghana. With fuel and utility tariffs increasing, lower income earners are likely to be the most affected, as incomes and salaries have not increased proportionately to inflation. This had led to changing priorities for consumers, with a focus on basic items such as food, water and clothing.
However, the negative macroeconomic conditions affecting the sector are expected to be short-term challenges, with consumer confidence anticipated to rebound. Despite the downturn, it is important to recognise the opportunities ahead, and invest in the expansion of shopping centres and other retail infrastructure to benefit from the anticipated turnaround.
Opportunities exist for growth over the medium- to long-term in Ghana’s retail industry, and many businesses seem to acknowledge this trend. There is evidence of a substantial expansion in retail infrastructure for warehousing and new shopping centres in major cities across the country. This infrastructure expansion is likely to enhance access to goods and ensure the promotion of brands to satisfy demand.
In what ways can retail firms optimise their supply chains while meeting customers’ needs?
SADHWANI: The retail industry learned lessons from the supply chain disruptions and significant price hikes seen during the Covid-19 pandemic. This situation was worsened by reduced production capacities in countries from which Ghana imports goods. A key variable was the cost of shipping and freight charges at ports of entry, which increased prices for imported goods.
To optimise supply chains, businesses are focusing on working and benefitting from economies of scale through advanced planned purchases that can be negotiated at competitive rates. Companies need to rapidly deploy technology to ensure easier supply chain planning, lower operating costs and increase collaborations with stakeholders. Retail companies can also make use of backward integration strategies by investing in their own clearing agencies to accelerate the preparation, processing and clearing of imports. Retail firms could also benefit from investing in their own warehousing and transport infrastructure to reduce bottlenecks.
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