The dynamic trio behind Africa’s retail revolution

by MMC
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A recent economist article highlighted the recent growth of local supermarket chains across the African continent. Today, a stunning phenomenon 70% of Africans buy their everyday consumer products from local sellers. What’s driving this specialty, local retail on the continent? Three main trends have been working hard behind the scenes to fuel this quiet explosion.

High mobile penetration driven by favorable demographic trends

The African continent is home to youngest and fastest growing world population. It is a tapestry woven from various demographic, religious and socio-political dynamics. Importantly, it is home to a growing middle class of consumers. Fraym analysis firm estimates that there are 330 million people in this category, and that two-thirds are in just five countries: Egypt, Nigeria, South Africa and Algeria.

Mobile connectivity is a key theme for the continent. In 2023 alone, there has been 489 million unique subscribers registered across sub-Saharan Africa. Compared to their peers in other regions, African consumers rely more on their phones for banking and financial transactions. This is reflected in Mobile money boom: in 2020, Africans exchanged more than 490 billion dollars via this widely used platform.

Mobile’s dominance on the continent is even more impressive in light of the woefully inadequate infrastructure that is more often frustrating than it works. 3G remains the most dominant technology in the region, and 5G is just a mere 3% Adoption rate. Additionally, sub-Saharan Africa is home to some of the largest The highest mobile data prices. In light of these headwinds, the growth of mobile adoption in the region is even more impressive.

This high level of mobile penetration, coupled with inadequate infrastructure, means that there is a significant gap in consumer needs across the continent. Entrepreneurs and venture capital funds have seized this opportunity, contributing to a boom in early stage investing with a primary focus on fintech. Payment platforms are the recipients of a large portion of this funding, which has driven innovation and rapid improvements in end-to-end transaction processes.

Rise of secondary cities

Although much of the discourse on economic growth on the continent has focused on mega-urban centers like Lagos, a quiet revolution is underway in pockets of small and medium-sized cities across the continent. According to Economist, “of the 20 cities in Africa with the fastest growing populations between 2000 and 2020, only one is a capital (Abuja in Nigeria) and only five have a population of more than a million inhabitants” . For intrepid thinkers, this rapid growth has opened the door to gaining market share and capturing consumers in areas less served by traditional retail giants.

For example Market place, a Nigerian supermarket, has opened its first store in Yenagoa. Today, it has opened more than twenty stores in the country, driven by the growth of these secondary cities. Marketquare’s success also reveals another trend on the continent: an increased focus on regional preferences. Small grocers tend to dominate across the continent, with the exception of South Africa. A number of factors are causing this, from volatile foreign exchange markets to inadequate infrastructure and complex regulatory policies. E-commerce on the continent continues to grow, but still lags behind its peers in Latin America and Southeast Asia. This confluence of factors means that local retailers will continue to dominate consumers’ share of wallet and be the key to driving further innovation.

A growing digital ecosystem

Finally, as fintech fuels the growth of payments improvement on the continent, a growing number of emerging technology providers are providing innovative digital solutions to the region’s traditional retailers. For example, Nigerian fintech Alerzosupported by Capital of Nosara, seeks to empower street vendors and stores by providing last-mile distribution to help store inventory directly from manufacturers. It has also expanded its product offerings to include enhanced e-commerce and logistics features.

The thriving growth of local supermarket chains in Africa is driven by three fundamental trends. First, high mobile penetration on the continent, driven by favorable demographic trends, has created a unique landscape in which mobile connectivity plays a central role in daily life and financial transactions. This has led to increased focus on fintech, with innovative payment platforms seeing increased investment. Second, the rise of secondary markets, particularly in small and medium-sized cities, has allowed local retailers like Marketsquare to thrive by catering to regional preferences and filling gaps left by traditional retail giants. Finally, the growing digital ecosystem, fueled by the rise of fintech companies and emerging technology providers, is transforming the retail landscape by providing traditional retailers with innovative solutions.

And after

As Africa celebrates the success of its local supermarket chains, these trends will likely continue to shape the continent’s retail sector, driving innovation and economic growth. Although much of the talk about the perpetual promise of the African continent has been mired by political instability and currency volatility, this steady growth in digital innovation trade shows why the African continent should capture a greater share of global investment. As an African proverb says: no matter how long the winter lasts, spring will certainly follow.

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