African retail brands face ultimate test.

The next wave of retail in Africa will be a tsunami

Around this time last year, I wrote about retail chain brands rising to prominence across Africa.  I was referring of course to our dynamic local retail sector is emerging from its history of kiosks, dukas and general stores. Traditionally dominated by Indian immigrants in East Africa, and Lebanese in the West, Africa retail used established trading and distribution practices. It controlled consumer choice, and influenced the development of consumer brands. Often held it back, if truth were told. Its primary focus was understandably on its own profitability, and on overcoming the logistics and credit issues that could cripple any business in Africa.

Out of this guarded heritage, the first supermarkets, and the first chains have emerged. But when I wrote about them being brands, I may have been over-generous. Certainly there are now recognised names, with increasingly familiar store identities. Consistent look and feel has been mastered. Secure car parking, anchor positions in new retail malls, bakery and butchery offerings and better display disciplines are all now on offer. No small level of achievement this. In Southern Africa this was a product of the big retail stores advancing deliberately across the Limpopo River. So in Botswana, or Zambia, you can Pick’n’ Pay or check your Shoprite just as if you were in downtown Pietermaritzburg. In East Africa, the progress has been organic – with chains like Nakumatt and Uchumi, Tusky’s and Naivas, Chandarana and Ukwala rising to prominence.

But are they brands? Well, if they are not yet, some are certainly on the way to becoming brands.

Remember that a brand is an instantly recognised and appreciated package of functional delivery and emotional impact. And to be understood, a brand, and particularly a retail brand, has to face consumers and communicate a message that talks to their needs.

‘Save money, live better.’ Is one such message. It comes from US retail giant WalMart. And Walmart is coming to Africa. South African supermarket giant, Massmart, which is owned 51 per cent by Walmart, has booked space in the Garden City shopping mall on Thika Road, whose construction is to start in December this year and be completed by May 2014. Indeed the appetite for Kenya’s retail industry continues to grow, with the impending entry of three other international retail chains. Game Stores, Jet, and Edgars plan to open shop in Kenya by 2014.

Nakumatt boss Atul Shah is sanguine and courteous about the prospect of increased competition. Interviewed recently for www.howwemadeitinafrica.com, he was asked if he saw Wal-Mart’s entry into Africa as a threat.

“Not at all. As a progressive company we actually encourage local and international competition. We are very much confident that we have learnt a lot about retail in this market and we are well equipped to thrive even if the global players were to enter this market. We have a wealth of experience to guide us through and remain confident that we would emerge as the preferred option.”

And of South Africa’s Shoprite chain, he said: ‘Very worthy competitors for whom we accord the necessary respect.’

Shah talked positively about Nakumatt’s own regional growth plans, including selling equity to investors: ‘Yes, this is still an outstanding pledge to share our success with our customers. Beyond offering share options to strategic investors, we also plan to reserve some shares for our members of staff who will be entitled to employee share ownership options alongside our loyal customers. This we may manage to undertake through an IPO, ideally by cross-listing across the bourses in Kenya, Rwanda, Tanzania and Uganda.’

All good stuff, and just what we would expect from the best of Kenyan entrepreneurial businesses.

But I feel there is another step that these local success stories need to take before the retail giants walk our lands. They need to move beyond the ‘build it, and they will come’ mentality.

Soon consumers will have other places to go. Shopping chains that will take hold of their hearts as well as their minds. Fully rounded brands that market directly to them. Offer them services that are both relevant and unexpected. I see this week Walmart is offering customers free flu vaccinations, for example.

(My goodness, if Nakumatt could do something about ‘Monday Malaria’ how our staff productivity rates would boom!)

Successful retail chains have a broad societal impact. If managed well, they become strong contributors to community and national life. They also contribute to the character of the Nation Brand by becoming ‘ambassadors’ to the countries in their expansion plans.

So the race is on for African retail chains to become African retail brands. And the good news is that African consumers will be right behind them.

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