Early in the morning, people from local villages stream the local market, with their produce ready for sales. This is called the market day. They sell their farm produce. In return, they buy household commodities such as soap, sugar, salt, cooking oil. On the other hand, there is another group from the village that directs their cows, goats and sheep to a designated area near the shopping centre. This is an auction area. They haggle and auction their livestock. In return, they buy another breed or different animal from what they brought to the market place.
The above is a common story about many rural and peri-urban set ups across Africa. Market days still exist in many areas, and this is the day when most towns in the said areas are a buzz with activities. It is the day not only for farm produces, but also brands exploit the day for road shows and mini-exhibitions. It is the day truckloads of household goods, bales of new and second hand clothes find their way to the town. Mini trucks with music blazing move round the town, with interludes to promote one brand or another. Some markets take place once a week, others two times a week. It all depends on the local rules. A high number of consumers also flock to the towns on these days.
Market places and market days are common elements within various locations across the continent. Africa is home to large open markets. This includes large scale markets such as Alaba International Market in Lagos, Kejetia in Kumasi, the Souq in Marrakech, Gikomba in Nairobi to the Joburg market in Johannesburg. These are the some key engines that drive the consumer market around the continent. They provide affordable solutions to many people across the continent. They form key part of trade. The haggling and the frenzy in these markets shape the buying and selling habits.
In addition to the markets, the consumer also has a range of retail outlets available to him or her. The small retail shops dot both rural and urban centers. Indeed, these outlets form a key element within the channel to meet consumers’ demands. This is a key source of goods and services for consumers across the continent.
There are various reasons for the mushrooming of these retail outlets across the continent. From a business perspective, the low cost of setting up is a key factor. In addition, most of these outlets address the demands of the consumers within the neighborhood. They stock basic items that are in demand within the locality.
A key role is also breaking the bulk to sizes commensurate to the demand and at a price affordable to the consumers. The bottom of the pyramid in most countries within the continent is still high in proportion to the whole population. For example, according to the World Bank, the poverty headcount ratio at $1.90 a day, the percentage of population stands at 42.7%. However, if we take the World Bank’s measure of $3.10 a day, then the proportion increases to 67% people in Sub Sahara Africa living below that measure. This implies the 365 Million or 573 Million people are below poverty line, by respective measures.
However, as incomes improve across the continent, the sizes and varieties of products consumers demand vary. In addition, the role of these outlets is evolving in line with changes in the market. In addition to consumer goods, some of these outlets are taking up areas such as agency services either in banking sector or mobile money services,
Affordability and availability of products within a given location are the factors that are keeping these outlets on the move. In addition, most of the operators of these outlets know their customers, since they operate and live amongst each other within a given location. This provides an opportunity for customers to pick goods on credit and pay after a given duration – at the end of the day, end of the week or by end of the month.
As incomes, habits and preferences change, there has been a rise of the minimarts and small supermarkets within the neighborhoods. Convenience in buying a basket of items from the same premises is a key factor in the rise of these outlets. However, the units of stock have remained relatively small to cater for consumptions within a given location. In some cases, owners have just converted their previous shops to minimarts to cater for the new shopping habits. However, these outlets have only catered for household items, some categories of food items and consumer goods.
Other items traditional market such as the ones listed at the beginning of this article. These are mostly the informal channels with all sorts of accessories and products, both new and second hand items within the same location. These traditional outlets are still ingrained in the psyche and shopping habits of consumers across most markets in Africa. It is no wonder some consumers will buy packed food items like sugar, salt, soap …etc. from a supermarket, but then pass by the local roadside market to buy vegetables and other groceries. High traffic to informal second hand markets for clothing could also be due to perceived price differences and range of choices in such outlets. This implies consumers visiting such outlets are seeking functional items. In this case, fulfilling a function, more than brand preference, is the key factor. This implies, for example, a consumer visiting Kejetia market in Ghana to shop for clothes, will most likely search for items that are fitting, durable and meet his / her expectations.
Supermarkets & Malls
However, the last 10 years have seen the rise of an increasing number of supermarkets and development of a formal retail sector. South Africa is a clear leader in formal retail sector. It has a well-developed retail sector, with the strong supporting factors such as availability of large and well-structured retail spaces, logistics and relatively higher income levels. Estimates show about 60% of the retail sector in South Africa is formalized. This is the most formalized retail market within the continent.
Developers in other high growth markets in Africa such as Kenya, Ghana, Nigeria, Tunisia are putting into consideration the growth of formal retail spaces. Hence, there is a significant growth of malls and hypermarkets. While still at an infancy stage, this growth is expected to push the development of formal retail sector. Aspirational factors, as well convenience will continue to bring in a large segment of consumers to the formal markets.
All in all, the shopping habits are at an early stage. Will the malls and other formal channel replace the informal ones? The informal markets will continue to serve large portion of the population. It will serve the large portion of the market and provide an opportune channel for many consumers across the continent. The aspirational level, which is a key factor in driving consumers to formal retail outlets is growing, and will continue to be so for a long time. However, this growth will depend on the rise of incomes, as the bottom of the pyramid still remains quite heavy. Hence, the formal and informal markets will continue to thrive across the continent.
The challenge will therefore lie with the marketers in terms of positioning their products and services. It is important to note the informal part does not imply lack of purchasing power. This can be a grievous mistake! Local brands understand this phenomenon. For instance, local banks have opened branches as well as agencies in most informal markets, and at the same time have branches in most formal parts of the market. There should be no linear expectations that as incomes rise, consumers will shift from informal to formal markets. Due to the structural nature of markets in most countries, an increase in income may not lead to change in habits. It is no wonder to find even high net worth consumers patronizing these informal markets.
Going Online
In addition, the entry of online market places and channels, fueled by the growth in mobile technology will also play a role in development of the retail sector. Given the demographic spread across the continent and the growing number of tech savvy consumers. As highlighted, the introduction of digital education from young age is providing an opportune moment for growth of online channel.
However, this is also at the nascent stages. The available players, though registering significant growth rates, are yet to penetrate the mainstream markets or take a large share of the market.
Mobile phone enabled sites and applications will be a key driver for this growth given the high and growing penetration of mobile phones within the continent. This is due to the fast growing adoption of mobile phones and broadband internet. In Africa, online players will have to target, meet and engage consumers on their mobile phones. Having evolving mobile phone based ecosystems will be key drivers. Overall, online channel will play a key role in most markets across the continent.
