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Sub-Saharan Africa Shows Western Retailers how to Leapfrog to the Future of Retail By leveraging a Sense of Community

(Bearing Point) How digitalization efforts are leveraging a sense of community combined with platforms, commerce value chains and mobile apps to enhance cost optimization and achieve greater market decentralization.

In 30 seconds

  • Sub-Saharan countries are promising from a retail perspective. Faced with a fragile but growing middle class, numerous infrastructure challenges and a low density of physical stores, the law of supply and demand is hard at work. Sub-Saharan Africans have demonstrated creativity by ‘leapfrogging’ from traditional commerce to m-commerce and social commerce.
  • Infrastructure challenges such as lack of transport, banking infrastructure, and inadequate logistics services have inspired sub-Saharan retailers to develop alternative approaches leveraging the platform economy. They are leveraging communities of consumers to conduct some retail functions.
  • Sub-Saharan Africa has many examples of simple innovation and innovative services that should serve to inspire Western retailers in creating more agility in addressing rapidly-changing customer expectations and take a new role in developing social and ecological responsibility. By doing so, they are contributing to a stronger sense of belonging for customers.

Findings

  • Africa is a promising continent for retailers, with a middle-class of 350 million people (note 2). In 2040, this number could increase to 900 million people, more than the middle-classes of China and India combined (note 3). 13 out of the 29 so called ‘border countries’ in the world (with low income but growing constantly), are African.
  • Although shopping malls are burgeoning, smartphones and e-commerce are the backbone of retail development. 88% of Nigerian Millennials and 71% of South African Millennials paid with an app on their mobile last year (note 4), and m-payment is a domain in which the continent is a leader.
  • Logistics is the key challenge for digital and bricks & mortar retailers in Africa, with three main dimensions: the mediocre quality and lack of transport infrastructures, the lack of postal addresses, and the difficult and heterogeneous frontier management. They cannot rely on strong and competitive logistics & delivery specialists. To overcome this challenge, alternative logistics models have emerged to avoid colossal investments. One such example is Jumia (note 5). This pan-African e-commerce player has built its own logistics marketplace to leverage third party companies and self-entrepreneurs for city-to-city and last-mile deliveries. This platform also offers its services to other retailers as a white label.
  • Social networks are having a huge success in sub-Saharan Africa. As a result, these are transforming retail, relying on a strong sense of community: 75% of South African and Nigerian spend more money compared to a few years ago on the basics of taking care of their family, according to the BearingPoint/WSL study – a figure much higher than China’s. In this context, several retailers or startups are offering platforms for consumers to take on some aspects of the retail value chain (such as merchandizing control with Optimetriks (note 6), price checks or last-mile deliveries).

If you have a look at the departure gate from any major European airport to a sub-Saharan African country, you may be surprised by the amount of luggage you see. A deeply-rooted sense of community becomes obvious when one sees the number of parcels sub-Saharan African natives living in Europe take to relatives, neighbors, and even strangers. In addition, digital platforms such as KakoExpress, a Cameroonian start up, are connecting travelers with parcel senders. This reveals a deeply rooted sense of community by leveraging return trips from Europe to transport parcels for others. This example illustrates how African culture and technologies can be smartly combined.

Beyond parcel delivery, numerous African countries are using digitalization and a sense of community to get a fresh perspective on retail. They are seeing a rise of purchasing power in a world becoming more and more digital, thus leapfrogging to new business models without being bound by numerous bricks & mortar stores.

Sub-Saharan Africa can be an inspiration for Western retailers facing sluggish growth and characterized by a strong individualism for more than half a century. This report provides examples of innovation in the sub-Saharan African region by focusing on two countries with differing levels of retail maturity – Nigeria and South Africa – and what European retailers can learn from them.

Read the whole article on Bearing Point