Does Shoprite have a Share of Wallet Problem?
When the story of Africa’s biggest supermarket chain pulling out of Nigeria broke, the ready-made explanation was Nigeria’s well documented economic woes.
Shoprite did put things in context when briefing certain stakeholders. The company noted that its advertised departure was premature. It highlighted the combined effect, the devaluation of the Naira and the downward pressure on the Rand vis a vis the US Dollar, was having on its profit. It made clear that it is seeking a partner who will offer ‘’clear synergies in the form of local capital and knowledge’’.
The structural issues behind Nigeria’s economic woes are well documented with key economic indices continuing to trend downwards. Of course, a key symptom of this intractable woe is the country’s shrinking middle-class despite its growing population. The standard bank group prediction that 11% of the population will be middle-class by 2030 now look increasingly fanciful. So, it is easy to point at this and other externalities as the primary cause of Shoprite’s problems in Nigeria.
Yet, maybe in this instance, a bit of soul searching might not be out of place. For example, something that Shoprite might want to consider is its seemingly low share of wallet among Nigeria’s shrinking middle class.
Share of wallet data for Shoprite or any other retailer for that matter is not publicly available, so we are going to rely on anecdotal evidence to illustrate this point.
The Shoprite at the Ikeja City Mall is located within a 10–15 minutes radius of the Magodo/Omole 1/Omole 2/Isheri middle-class cluster. Annual rental for a three-bedroom apartment in this part of town is north of a million Naira, so the area and its emerging extension on the Lagos-Ibadan expressway is solidly middle-class. Yet, what percentage of the families in this middle-class area shop regularly at Shoprite? Despite operating 26 stores across 8 states, what percentage of Nigeria’s current 4.1 million middle-class households shop regularly at its stores?
As a resident of this cluster, I mostly shop at smaller, nimbler grocers located within one or the other of these neighbourhoods. Interestingly, of all these grocers — Addide, Hubmart, West gate mall and De-Prince, only Justrite predates Shoprite, so all these stores have essentially sprung up to take a piece of the pie, Shoprite’s pie. Worse, it is distinctly 2nd or 3rd choice for many of these shoppers, shoppers, who by virtue of living in this part of town, are exactly its target group.
Why is Shoprite distinctly 2nd or 3rd choice? Well, only primary research can reveal shopper preference. Why do shoppers prefer to divide their spending between Shoprite and their competitors? Why do other supermarkets rank higher, but I will hazard a guess.
While these shoppers spend more or less the same amount on grocery (despite the bruising economic downturn), they are mostly unwilling to ignore less ‘fancied’ supermarkets located blocks away from their homes in favour of ‘travelling’ to the more glamorous mall with a wider, deeper product selections. So, basically, while they still visit Shoprite, they reserve their frequent shopping for neighbourhood supermarkets.
Leaving aside this much vaunted housing cluster for a minute.
The Ikeja city mall is located beside the Lagos state government complex. This office complex is teeming with civil servants most of who live much farther away, but due to exigency of time, mostly shop around work. Yet, rather than turn to Shoprite, this group organizes small groceries-focused cooperatives among themselves.
Interestingly, the Shoprite at the Ikeja City Mall is in a relatively central location and still manages to command significant footfall. Same cannot be said about its stores outside of Lagos. Across the other 7 cities including Abuja where you can find a Shoprite store, the locations are curiously far away from neighbourhoods.
The Shoprite in Ibadan is located on Ring road next to Liberty stadium. As anyone who know Ibadan will tell you, Ring road has this formal, ‘away from home’ feel about it. That means even the limited proportion of Ibadan residents who are middle-class favour their neighbourhood grocers.
On a trip to Owerri last year, the owner of a fast-moving luxury brand, who ironically mirrors Shoprite’s location strategy, asked me to go play mystery shopper at their local store. Owerri is a dense town concentrated around the intersection of 3 or 4 key roads — the roads from Port Harcourt, Onitsha, Aba, and Orlu, But the mall where Shoprite and the fast-moving luxury brand is located is tucked away from town (on Egbu road), on the wrong side of the emerging cluster of new shinny apartment blocks that dot the Owerri landscape, where again, the city’s middle-class live.
It is no different across the other states. The location and size of its stores, rather than being an advantage, weakens its ability to attract, on a regular basis, its target audience prefer to shop at supermarkets that are within touching distance of their homes. This clearly impacts its share of wallet.
