Retail in Africa (1/2): challenges and opportunities for local brands facing international giants
Distribution in Africa is a rapidly changing field for both mass distribution and selective distribution. Over the past ten years, this environment has undergone rapid change, moving from traditional markets to modern shopping centers and e-commerce. This transformation offers new opportunities for global brands but also challenges for African brands.
The digitalization of the last decade has exposed African brands to the world and allowed them to conquer an international clientele.
However, when you visit shopping centers in Abidjan, Dakar or Douala, you can count on the fingers of one hand the local brand stores. Even if the African offer has radically transformed and diversified thanks to the diaspora and digitalization, penetration of the local and pan-African market remains very low and represents an almost insurmountable challenge for African brands.
1. The landscape of mass distribution from the center to the west of Africa
Large cities in the west or center of the continent have experienced a strong expansion of shopping centers for several decades.
The arrival of distribution giants in major capitals such as Dakar, Douala or Abidjan has made it possible to further structure the customer experience for international brands that represent a little over 70% of the offer at Prosuma in Ivory Coast (Cash Ivoire, Cash Express, Bonprix), at Dovv, Santa Lucia, Carrefour in Cameroon or at Auchan Retail Senegal, in Senegal.
Moreover, in this landscape, the vast majority of distribution brands are international, with the exception of Cameroon where brands such as Dovv & Santa Lucia stand out with an aggressive establishment in Douala and Yaoundé.
E-commerce remains an equation with many unknowns where the most daring like Jumia are faced with the challenges of logistics. For pure players of Made of Africa such as Anka.com with a vision of international distribution before continental distribution, the multiple fundraisings of this young company launched in 2012 continue to confirm the potential of the African offer throughout the world.
2. The selective distribution niche
The selective distribution landscape has also developed rapidly in the last decade; iconic boutiques such as ALÁRA Lagos in Nigeria, stands out with a luxury signature and a vision to educate the world about African luxury by exhibiting it alongside brands such as Hermès, Louboutin and many others, an innovation that offends the minds of those who associate luxury only with Paris and its beautiful avenues. Designed by architect David Adjaye, the brand offers a sharp selection of African and international fashion, design and contemporary art.
View from Alara Lagos
In Ghana, The Lotte Accra offers a personalized shopping experience, mixing international brands and African designers in an elegant setting.
In Ivory Coast, ABY Concept in Abidjan positions itself as a showcase for luxury and contemporary African design, offering a careful selection of 100% African fashion, accessories and decorative objects.
Other specialists such as Zino in Abidjan, a specialist in watches, jewelry, perfumes and beauty, are forced to offer almost exclusively international products. Asked about this point during the Retail Leaders Dinner by Retail Revive Services on October 10 in Abidjan, Kamal DASWANI, CEO of ZINO CI, reminded me that the role of the distributor is to support brands that already have a very desirable and confirmed brand capital. A luxury status with customers for brands on the continent must be worked on; The exercise of making your product desired in the collective imagination requires time, consistency and know-how and agencies like mine to find and support a new generation of brands towards the market.
Among these specialists in selective distribution, the emergence of a dynamic African luxury scene, merging local and international influences is underway and often to differentiate themselves from mass distribution, these brands spare no effort to offer a neat and avant-garde interior design, a sharp selection of exclusive products, an event approach (art exhibitions, events), personalized services and spaces dedicated to gastronomy (restaurants, bars).
3. Perspectives & prospects of luxury in Africa
Currently, the luxury market in Africa is largely dominated by Western brands. 90% of the brands chosen by wealthy African consumers are foreign. Among the favorite brands of African High Net Worth Individuals (HNWI), none are from the continent.
African brands are still struggling to establish themselves in the luxury and selective distribution landscape in Africa, despite a certain potential. And for this sector in particular, training is at the heart of the equation.
It would be necessary to strengthen the capacities of artisans in particular so that the finesse of their know-how becomes the norm. A luxury industry is possible with small hands, but often everywhere in the world these small hands must serve a well-equipped and well-oiled system; which is not the case in a majority of countries on the continent. International houses, thanks to their head start, have created standards in terms of quality and service. Even if it is not proper to compare oneself to these houses on the creative and artistic level - because the signature of each creator must be singular and unique - it remains on the environment that must be created to nourish the part of dream that creates desire and positions the brand in the mind of the consumer and on the market.
Despite these obstacles, the potential exists for African brands. The continent is full of age-old artisanal know-how that can inspire unique creations. In West African countries like Senegal and Ghana, creators show us through their successes that local cultural heritage when told with contemporary codes can seduce the whole world.
4. Challenges for African brands
As consumers in Africa become more and more savvy, demanding and market trends evolve rapidly, local brands find themselves in an increasingly complex environment. While international brands seem to have almost everything they need to succeed in Africa: know-how, notoriety, experience and financial and logistical means.
In this competitive landscape, here are 3 key challenges that limit the potential of local brands:
a. Production capacity
The paradox is that the most difficult thing for local brands is not market saturation but the ability to respond quickly to the demand of the middle class whose purchasing power continues to grow. Indeed, local brands, due to their cultural proximity to consumers and their habits, often have the right products but often remain limited in their ability to produce in volume and at a sustained rate. Sometimes for structural reasons and far too often for reasons of limited skills or real financial means to scale up.
b. Competitiveness of local products
Structural obstacles such as the infrastructure deficit, particularly in transport and storage, the limited supply of skilled labor, the fragility of standardization institutions, the difficulty of access to semi-finished raw materials have a very radical impact on the cost of production. In the end, African products for a lower quality are sometimes more expensive than products imported from Asia, Europe or America.
c. Traceability, certification and standardization to international standards
In a large part of French-speaking Africa, traceability systems are incomplete or non-operational partly because of oligopolies that do not want to invest in the direct costs imposed by traceability and certification. This lack of willingness to invest meets the infrastructure deficit that makes the task difficult for control institutions. The latter do not have the means to guarantee the conformity of all products in circulation. Even if, mass distribution and consumer protection require that certain rules be respected in marketing for both mass-market products and other categories such as fashion, decoration, beauty products and many others whose use remains occasional.
In the second part of this article, you will discover strategies for local brands facing international giants.