If you were born in Cape Town or Johannesburg, you need to step out of those two cities to actually visit “Africa”. Yes, Cape Town is as amazing as San Francisco. Living and working in Cape Town does not really mean that you are working in Africa because there is nothing sub-Saharan Africa there, except the geography. That explains why a playbook perfected in Cape Town or Johannesburg may struggle outside those domains.
Shoprite is leaving Nigeria (sure, a court said it cannot leave yet). Now, it has added Kenya in the list. While you can blame Kenya or Nigeria, the fact is this: Shoprite is not selling a market-fit product in these countries. With open markets everywhere, the competition is exceedingly high for these highly structured and expensive retail chains to thrive in sub-Saharan Africa.
That is the challenge for Shoprite, and it may be the reason while it is retreating back to South Africa. It needs to update its playbook because what it has now is not selling.
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South Africa’s Shoprite Holdings said on Tuesday it expected to close or dispose of its remaining two stores in Kenya in the year ahead, leaving the East African country after opening its first store there more than two years ago.
The supermarket chain has been reviewing its long-term options in Africa as currency devaluations, supply issues and low consumer spending in Angola, Nigeria and Zambia have weighed on earnings.
“Kenya has continued to underperform relative to our return requirements,” the retailer said, adding its decision to leave had been confirmed by the economic impact of COVID-19.
Shoprite opened its first supermarket in Kenya at Westgate Mall, Nairobi, in December 2018, hoping to take advantage of disarray in Kenya’s grocery sector after the collapse of Uchumi Supermarkets and Nakumatt, two of the country’s top three retailers.
The decision to leave comes a month after Shoprite said it was considering reducing or selling all of its stake in its Nigerian subsidiary.
Shoprite, with more than 2,300 stores across Africa, reported a 6.4% rise in sales for the year ended June 28, with like-for-like sales up by 4.4% as customers spent more on groceries at its discount Usave and mid-to-upper end Checkers stores.
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There’s a difference between replicating what worked somewhere in another location, and that of developing a solution for a particular market. If you are not selling general purpose software, there’s really nothing to replicate across Africa, each market is as unique as fingerprints.
Cost is cost anywhere, but returns can easily be worthless just by moving from one location to another. So when you have huge operating cost as a result of your business model, you barely have margins to manoeuvre.
As always, it’s about building problem-inspired solution, and never about solution-inspired problem; many entrepreneurs are guilty of the latter.
Game on…
This is apt. Indeed they have done little or no customer research.
The most competitive positioning in this part of the world is pricing. It is indeed clear that a large number of visitors going to shoprite go for either price survey, leisure tour to feed the eyes and enjoy the good environment and to make photo shoots.
Perhaps, this is not the reason shoprite is established. The likes of sahad stores in Abuja and Kano, and jifatu in Kano will definitely sell more than shoprite as their pricing accomodate the spending power of the majority.
I believe they need locals who have business analysis skills to suggest a model for them to succeed.
Hi – I fully accept the points this article makes, but it seems different in Zambia. Here, in my opinion, ShopRite has been the one to do best under Covid-19 while it’s competitors like Pik ‘n Pay are struggling and Spar has left and Food Lovers only one store left. So Shoprite can do OK in some countries and maybe it is competition. I do not know the Nigerian market but Kenya is very competitive. Maybe ShopRite was not expecting this. And maybe in Zambia they only have to compete against SA chains.