Winning strategies to navigate Africa’s consumer market
Africa, a continent with over 1.2 billion people, is one of the largest consumer markets in the world. Over the past few years, international businesses have become increasingly aware of the vast potential in Africa’s burgeoning consumer market.
A large population of African consumers is young, tech-savvy people who are constantly adapting to emerging trends, and they are the largest consumers in the market. According to a report by Mc Kinsey, African consumers are young and willing to spend. Fifty-three per cent of income earners in Africa are between 16 and 34 years old—an age group that tends to be more aware of and eager to try new products. These consumers will contribute to more than $400 billion in total consumption growth in the next decade.
Africa’s e-commerce markets are currently the least developed globally, signalling the enormous potential for future growth as the region’s emerging markets undergo a process of economic modernisation and demographic transformation. Within Africa, the largest consumer market in terms of the total volume is Nigeria, worth roughly $370 billion in 2013, followed by Egypt, South Africa, Algeria, Angola, Morocco, Sudan, and Kenya. By 2030, the largest consumer markets will include Nigeria, Egypt, and South Africa. There will also be lucrative opportunities in Algeria, Angola, Ethiopia, Ghana, Kenya, Morocco, Sudan, Tunisia, and Tanzania, among other African countries.
Over the years, the continent has seen many international businesses spotting Africa’s large consumer market. Still, they are challenges that businesses might face when entering a large consumer market in Africa, such as Government regulation, political instability and poor infrastructure. Yet, despite these challenges, some companies have ventured into this market and experienced rapid growth and a vast adoption rate.
For businesses to navigate these markets, it is advisable to look out for the key drivers of consumer demands, including:
- Urbanisation: Since most African consumers currently shop at informal outlets, future growth in the retail sector will be primarily driven by factors that increase household spending and contribute to the shift toward modern, formal consumption. It is necessary to look out for cities that are rapidly transforming from rural to urban cities. Urbanisation tends to produce more significant gains in consumer spending. When consumer spending is high, it can open up new markets for businesses. Analysts have projected that the population living in cities will massively increase over the next few years, with some of the most lucrative markets in places such as Nigeria, Ghana, and Angola likely to top 80 per cent.
- Population and demographics: The future growth potential for Africa’s consumer market is bolstered by positive demographic forecasts. While the global population is ageing, Africa’s workforce is increasingly young, urban, and affluents and nearly two-thirds of its inhabitants are under the age of 25. These young consumers are key drivers of consumer trends.
- Technology: With the high rate of internet penetration in Africa, access to smartphones is giving consumers more control over their shopping experiences. The continent’s informal sector is gradually coming online. In more established retail markets in Africa, nearly all formal brick-and-mortar retailers have an online presence, including a growing number of supermarkets. The pandemic also fast-tracked this change.
How to navigate the consumer market in Africa
There is no magic bullet for succeeding in Africa due to the diverse consumer segment comprising different classes of people. Still, businesses can win by doing the following:
- Capitalising on the boom in digital and mobile technologies, including opportunities presented by the e-commerce sector. In countries like Nigeria, modern retail shares are growing rapidly, fueled by population trends and urbanisation. Growth rates are expected to increase in the coming years with the development of large-scale shopping centres and more e-commerce businesses.
- Identifying market niches and successfully tailoring offerings to meet consumer demands or local conditions. African consumers across all income brackets are highly brand-conscious.
- Identifying the right local partners in each country and forging strategic partnerships. These partnerships may vary from geographic and technical expertise to distribution channels and localised sales forces.
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