By: Soumya Saklani, CEO, Insights @ Kantar North Africa, Pakistan

Soumya Saklani, CEO, Insights @ Kantar North Africa, Pakistan

With much of African retail still largely traditional and informal, the continent has seen huge technological developments in the past decade, which have been further accelerated by COVID-19’s restrictions in the retail space. Here’s my bird’s eye view on the Africa Rising narrative and the growth opportunities in this growing consumer market, as shared in Enterprise Singapore’s recent panel discussion on consumer and retail tech opportunities in Africa …

All African countries are not the same, nor are African consumers

We need to start with the caveat that though Africa is one continent, it’s certainly not one country or one typical consumer. There are vast differences in the diverse populations, with the affluent and educated consumers largely mirroring what’s been seen in the rest of the world, with a shift to working from home and doing more DIY cooking from home, which has led to an uptick in the sale of ready-to-eat meals and meal-enhancing condiments.

  1. Good news for companies looking at the continent with fresh eyes is that Africans are experimental and willing to try new brands and new propositions. Part of the reason why early multinational brands didn’t succeed (to expectations) in Africa was because they focused softer parts of their brand appeal, whereas the African consumer wants clear functional benefits and to understand What’s In It For Me (reason why).
  2. Africans are also highly aspirational. So, while it may seem that cheaper pricing and affordability are the key factors of success, in Africa consumers are willing to pay more where they see value, as evidenced by telecommunication giants MTN and Safaricom retaining a loyal customer base despite being a lot more expensive than their market counterparts.
  3. With health and hygiene top of mind, we’re also seeing increased interest in self-care products like aromatherapy candles, while the sizable middle class and base of the pyramid – largely young and aspirational future consumers – are also trading up from unbranded cooking oils, rice and seasoning in a move towards better quality. That’s a nice opportunity for food companies to leverage.

The fact that these consumers are both aspirational and experimental, willing to try new brands, shows the value of brand building for those already on the continent. Show them the benefit as they look for value for money. Asian smartphone brand Tecno Mobile saw the opportunity and ran with it, upsetting the traditional handset cart.

The shift to in-home moments of consumption

Looking at how COVID-19 has affected consumer behaviour both in the short term and the long-term, we see many of the trends are consistent globally. Key among these has been the challenge of shrinking spending power, with 86% of Nigerian households noting a significant decrease in disposable income and adjusting by postponing non-essential purchases. Due to lockdown restrictions and the shift to working from home across the region, in-home consumption also shot through the roof for certain categories, as new moments and occasions of consumption have sprung up at home, a trend for brands to note.

This shift to in-home consumption has been a boon for FMCG, particularly in the food and beverage sector. Nigeria, for example, saw a 21% increase in volume of food sales and 29% in beverage sales volumes in 2020, proving the short-term and medium-term opportunities of understanding shifts in consumer behaviour.

Then there’s the ‘lipstick effect’, identified by beauty care brand Estee Lauder and based in economic theory, which sees consumers following the desire to look after themselves and indulge selectively in times of crisis. Lipstick sales may well have risen during past recessions but in the pandemic of 2020, where mouths are largely masked when out in public, the lipstick effect is the reason behind those chocolate and snack purchases rather than luxury brands, as they count as little moments of pampering for the self and family. In Nigeria, we saw the custard category grow, proving that not everything goes down in time of crisis.

Three African consumer trends for now and the future

Given the health and hygiene concerns of the time, consumers are shopping closer to home, with 76% saying they prefer doing so in their neighbourhood stores as they’re averse to returning to larger malls in the short-term.

  1. For the long-term, the biggest trend for brands to note is that of purpose. Africans have always been more community oriented than individualistic, so for any brand to succeed with African consumers – particularly Millennials and Gen Z – you need to note that they are seeking a stronger sense of purpose from the brands they buy (giving back to society). This has been further amplified with COVID-19.
  2. With as much as 60% of Kenyan FMCG shopping spend taking place in small-scale neighbourhood stores, kiosks and dukas, we’re also seeing a surge in localism as brands adopt the mantra ‘Build Africa Buy Africa’, to boost economic opportunities, employment across the continent. For foreign brands, this means you can’t afford not to partner with leading local companies.
  3. This points to the fact that things are accelerating fast and there’s lots of room to grow, as Afro-optimism is strong. Despite severe ongoing challenges and hardships, as much as 90% of Nigerians are positive that conditions will improve post-COVID and the future remains bright.

So, enhance your brand’s stickiness by being inventive and innovative in all aspects of the business. You need to ensure you have a strong presence where your customers are, whether that’s in informal or formal trade, or in giving them more value. Some categories are being bought in bulk while indulgence categories see the benefit of low unit packs. There are also opportunities for brands to continue to strengthen their presence and enhance consumer loyalty across the board by constantly communicating to keep them in the loop on how your brand enhances their lives.

The current and future landscape of consumer/retail-tech in Africa

It’s fair to say that Africa is indeed bullish right now. Take South Africa’s YeboFresh now one of the fastest growing e-retailers, delivering a weekly package to consumers on the lower socio-economic scale to save them both transport costs and overall basket price. Then there’s the fact that the Harvard Business Review highlighted Kenya as a global hub of fintech innovation, with the country’s M-Pesa model seen as the most evolved mobile payment system anywhere in the world, for the purchase of everything from sweets to international plane tickets.

This was reflected when Kantar’s Global Business Compass study asked over 4,500 business leaders across the world about their current sentiments. As many as 91% of the business leaders interviewed in Africa do think online spending will increase, with 38% prioritising the addition of a delivery component (against just 16% of global respondents), as 44% prioritise adding ecommerce/online capabilities (against just 26% globally).

Recapping the tech innovations required in-market to help further unlock the continent’s consumer market potential, there are five key priorities:

  1. A reliable, low-cost digital payment system for the masses. We need to see Kenya’s Safaricom model replicated and scaled across the continent.
  2. More socially anchored, purpose-led ecommerce platforms, along the lines of Copia. This serves as an inspirational example of a purpose-led social business model in reaching a fifth of all under-served rural consumers when they walk into partnered agents’ stores to order on their behalf.
  3. Stronger, more reliable delivery models.
  4. Fuelling the ‘buy local’ trend by connecting local producers with end consumers.
  5. Servicing the informal trade sector from both a stocking and pricing perspective.