Retailers use SA to expand into Africa

Africa‚ whose top 18 cities may have a combined spending power of US$1.3trn‚ presents a compelling investment case for retailers as growth in their home markets slows.

Companies including Walmart‚ Inditex's Zara and Arcadia Group's Topshop have already moved into the African market through South Africa.

With the largest footprint among South Africa's retailers‚ Shoprite has earned its stripes as the continent's kingpin and the country's fast-food and apparel companies are now up shop in other countries.

"There are a billion untapped consumers in Africa and it's not easy from a supply-chain point of view‚ but there really isn't that kind of opportunity anywhere in the world. This makes Africa pretty unique‚" Bertschinger said.

SA retailers dominate

"The dominant companies moving north are the South African retailers. We're also seeing‚ because they have a language affinity‚ Portuguese and French retailers moving into countries where their languages are spoken," he said.

He was speaking following the release in July of the Accenture globalisation index‚ which analyses Planet Retail data for nearly 500 of the largest global retailers and examines their entry into new markets.

According to the index‚ global retailers entered 25 new markets during the first quarter of the year‚ spanning 22 countries in both mature and emerging markets.

The index highlighted the growing appeal of smaller-format stores.

Smaller stores

Retailers are rethinking investment in large stores in new markets‚ especially when they already have too much space in their home markets. Instead they are choosing to enter new markets with smaller-format and temporary or pop-up stores to gauge consumer interest in the brand and the potential success of a permanent store.

The index pointed to the increasing number of international moves by emerging market-based retailers. It said 20% of all market entries during the first quarter were by retailers based in emerging markets.

Accenture's managing director of global retail‚ Chris Donnelly‚ says this indicates a growing confidence for emerging markets among those retailers and‚ potentially‚ shows the early warning signs of saturation in some other markets.

According to Coronation Fund Managers global emerging markets analyst Suhail Suleman‚ emerging markets returned close to 19% in 2012‚ after experiencing a torrid time in 2011.

"Within emerging markets‚ however‚ most consumer businesses returned far in excess of the benchmark‚ particularly those with very dominant positions in their home markets‚" he said.