By Kelechi Deca
When Ketron Investment Limited, a Nigerian company owned by a group of local investors led by property firm Persianas Investment Ltd completed the acquisition of Shoprite Holdings Limited in Nigeria four years ago, expectations were sky high, that at least a Nigerian group that understands the shopping habits of Nigerians and the country’s consumer psychology would do better.
That deal which saw the complete exit of the retail giant from Nigeria after about 16 years of opening its first outlet was described as a change of strategy by the group “from an ownership model to a franchise model. Tayo Amusan, chairman of Ketron even boasted at the time that they are going to build an even stronger company, thus higher expectations from market watchers was not unusual.
But in the last few months, many of the malls owned by the retail company are ghosts of their former ebullient and chattering self. In many of the shops across Nigeria, you can hardly see up to 50 shoppers which contradicts the surge that used to be the case years ago.
Shoprite, which operated 2,843 supermarkets in 15 countries, serving 35 million customers in Africa and the Indian Ocean Islands, struggled with supply-chain disruptions and repatriation of funds – both familiar problems to foreign businesses across Africa
Shoprite, which operated 2,843 supermarkets in 15 countries, serving 35 million customers in Africa and the Indian Ocean Islands, struggled with supply-chain disruptions and repatriation of funds – both familiar problems to foreign businesses across Africa. And the chain reaction of that challenge led the retail giant to close shops across many countries in the continent.
Unfortunately, this is not just a Nigerian problem; it cuts across the retailer’s operations in other countries. Shoprite Holdings (SHPJ.J) a week ago announced that it is selling its operations in Ghana and Malawi, a decision it claimed was aimed at the consolidation of its activities across Africa to focus more on its home market. The supermarket retailer had expanded extensively in Africa, surpassing rivals such as Pick n Pay and Walmart-owned Massmart to become the continent’s leading food retailer in about 15 countries. But forays into markets, including Angola and Nigeria, were marred by currency volatility, double-digit inflation, high import duties and dollar-based rentals.
Shoprite Malawi signed an agreement on June 6 to dispose of five trading stores, pending certain conditions, including approval from the Competition and Fair Trading Commission as well as the Reserve Bank of Malawi. And in Ghana, the group received a binding offer in June for seven trading stores and one warehouse, a sale which is deemed highly probable.
This exit from Ghana and Malawi follows a trend with earlier exits from Nigeria, Kenya, Democratic Republic of Congo, Uganda and Madagascar with the retail giant restricting capital allocations to its supermarkets outside South Africa. This headwind according to observers has marred the fortune of Africa’s largest retail outlet and bruised its mission of building the continent’s mega retail outlet that could be regarded as Africa’s Walmart.
While Shoprite’s problems did not start with the Covid pandemic, the shut down had a terrible impact on its ability to recuperate from supply chain disruptions. Moreso, Shoprite was too rigid on a strategy that saw most of its products imported from its home country of South Africa which not only raised its overhead costs with currency fluctuations, but also with logistics challenges and inability of locals to warm up fast enough to some of the items on its shelves. The retail giant’s inability to incorporate local products fast enough forced shoppers to competitors.
Also the rise of online shopping following Covid pandemic drove shoppers away from traditional brick-and-mortar outlets like Shoprite, and the significant costs incurred by the company to adhere to the Covid-19 pandemic might have been the final nail in the coffin.
Severe devaluation of local currencies (e.g., Nigerian Naira, Angolan Kwanza) against the South African Rand significantly eroded profits when repatriated. What looked like local profit was actually a loss when converted back to the South African rand. Another major challenge was the soaring inflation in several markets drastically reduced consumers’ purchasing power, leading to lower sales volumes and shifting demand towards essential, lower-margin goods. Shoprite’s challenges were a direct reflection of the continent’s prolonged economic downturns especially in key markets like Nigeria and Angola directly impacted consumer spending.
Another major challenge Shoprite faced across the countries was the rise of competition, especially local chains that had better market penetration strategies and also more local products on offer. For example in Nigeria, while Shoprite struggled, Spar which is not even a local entity thrived, and in locations where both retailers are located, shoppers trooped more to Spar than Shoprite because Spar has more local products thus people saw it as their usual corner shop. Add to this, Shoprite’s model sometimes struggled to compete effectively on price with local alternatives in highly price-sensitive environments.
Where Shoprite failed, others such as Ebeano Supermarket, Next Cash & Carry, Grans Square amongst others seem to have thrived, which points to the failure of strategy as the major challenge faced by the retail giant, aside from other external forces beyond its control such as bureaucratic red-tapism, regulatory challenges, and economic recession. It was this strategy that gave rise to the birth of Bokku Mart, a neighborhood retail outlet that was birthed in 2022 but today has over 100 outlets, opening at the rate of one outlet per city every month. Armed with deeper market understanding, better supplier networks, and lower operating costs, Bokku is presently giving Spar a run for its money and has almost succeeded in running Shoprite out of town.
The retail giant noted that it made a conscious strategic decision to exit markets where sustained profitability seemed unlikely in the medium term due to the above factors. This included Nigeria, Kenya, Uganda, Madagascar, and they significantly scaled back in Angola and Mozambique. As it exited these markets, it refocused investment and management attention on its dominant and highly profitable operations in its home country of South Africa, neighboring Namibia, Botswana, Zambia, and Eswatini, where they have scale, established supply chains, and strong market positions.
Shoprite’s failure to build a pan-African retail brand remains a valuable marketing lesson for businesses planning to venture into the African market. It would help them understand how fractured it is especially along regional fault lines, and also the regulatory challenges and cultural aspects that influence consumption patterns.
Kelechi Deca, a journalist and public affairs analyst writes from Lagos
