The 2015 African Retail Development Index (Infographics, Video & Report): AT Kearney

Gabon and Botswana are ranked first and second in the 2015 African Retail Development Index (ARDI). Jaco Prinsloo, Principal at AT Kearney, said that the two economies saw improved fortunes due to the growing middle class. Marieke Mpanza-Witjes, Manager at AT Kearney, added that South African and Nigerian markets were saturated and this has affected their outlooks.

Retail potential on African continent confirmed

  • AT Kearney’s 2nd African Retail Development Index reconfirmed the continent’s retail potential.
  • Gabon (#1), Botswana (#2) and Angola (#3), in particular, provide retailers with diverse options for retail expansion.
  • Nigeria drops from #2 to #4. Nigeria is still a market to consider, while Tanzania leads the pack in East Africa.

Read the full report below.

AT Kearney’s recently released 2015 African Retail Development Index (ARDI) reveals the most attractive retail development markets across Africa for expansion. The report discusses the growth in the middle class in Africa, increased consumerism, the spread of malls, land being taken up for retail development and Sub-Saharan Africa’s young and connected middle class that is growing fast.

The report reveals:

  • The African retail landscape: What the retail market in Sub-Saharan Africa (SSA) looks like today
  • ARDI 2015 ranking including South Africa’s ranking and the opportunities for the country’s retailers in the rest of SSA
  • Right approaches to Africa: Which countries provide the best opportunities and how this links to retail maturity stages

Sub-Saharan Africa is brimming with potential, as it is one of the few market regions with annual GDP growth exceeding 5%.

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AT Kearney’s 2015 African Retail Development Index (ARDI) reconfirms the potential of many nations throughout Africa — not just oft-discussed markets like Nigeria and Ghana, but small, dynamic markets such as Gabon, the ARDI’s top-ranked market and the nation with Sub-Saharan Africa’s highest GDP per capita. Mid-sized and fast-growing countries such as third-ranked Angola are also discussed.

The report starts with a look at entry strategies for retail development in Sub-Saharan Africa, followed by an in-depth analysis of the top 15 countries.

The 2015 ARDI ranks the top 15 African countries according to market attractiveness for retail expansion. The ARDI is a useful framework for retailers because it not only identifies the markets in Africa most attractive for retail expansion today, but the report also notes those markets that offer the most potential.

The ARDI identifies three distinct stages of retail development in the top 15 countries: Basic, Developing, and Mature. South Africa is the only country in the Mature bracket. A Mature market is characterized by having a formal shopping culture, international and growing private label exposure, a certain level of innovation, as well as stable and transparent pricing. In this market, the key purchase drivers are convenience and quality.

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Mirko Warschun, AT Kearney Partner and Leader of the firm’s consumer industries and retail practice for Europe, Middle East, and Africa, noted that Nigeria (#4) moved down the index, despite its huge market size and room for growth. “Nigeria has massive room for growth in formal retail with 25 new shopping centres in development,” said Warschun. “True spending, however, remains comparatively low as the ‘true middle class’ is a lot smaller relative to the smaller countries ranked higher.”

However, Nigeria is still a market to give serious consideration, given the country’s tremendous economic potential and strong economic projections.

While Tanzania (#5) has dropped a notch, it was the largest and most stable of the East African Community countries. The country remains an attractive retail market, said Warschun. “Tanzania is in the early stages of development, and therein lies the opportunity,” he said. “This unsaturated market has one of Africa’s fastest growing retail sectors, boosted by new shopping malls.”

Bart Van Dijk, AT Kearney Partner and Leader of the firm’s consumer industries and retail practice in Africa, said that it is critical to think of Africa as a set of opportunities that can be augmented onto one another, as opposed to viewing Africa as a singular opportunity. “How you pick among the opportunities depends on your offering,” he said. “Retailers with a basic offering should target the large cities and countries because scale will be important, while retailers with a wider assortment should target higher average income countries including the smaller ones.”

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The ARDI is based on four dimensions: market size, market saturation, country risk, and time pressure, and ranks the potential and urgency of moving into each country accordingly.

2015 ARDI Results

The ARDI highlights some interesting developments. Two small countries — Gabon and Botswana — are ranked first and second, while Ethiopia, with Africa’s second largest population, barely cracks the top 15.

The ARDI report includes a summary of all 15 countries in the Index, recommendations for the Cash and Carry retail model, and commentary on the opportunity presented by the East African Community — Kenya, Tanzania, Uganda, and Rwanda.

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The report also provides entry strategy recommendations for each stage — Basic, Developing, and Mature.

Mike Moriarty, AT Kearney Partner and Leader of the firm’s Global Consumer Institute, concluded, “Success in Africa requires analysis, understanding, and the flexibility to customize, but for those willing to take the risk, the rewards are plentiful.”

The 2015 African Retail Development Index: AT Kearney

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Source: 2015 African Retail Development Index – A.T. Kearney