Why Shoprite Finally Decided To Leave Nigeria

Shoprite Holdings, the owner of Africa’s largest retail brand, Shoprite, had earlier announced through its Nigerian subsidiary on August 3, 2020, that it was considering offers from investors for the sale of its Nigerian retail entity. The company finally bade Nigeria farewell On the 1st day of June 2021, when Ketron Investment Limited completed the acquisition of its operations in Nigeria.

The Relationship Between Shoprite Holdings and Investors of Shoprite Nigeria

The move means Shoprite Holdings will sell its entity in its entirety to another investor, who will continue to run the business, thereby preserving the brand’s existing name and goodwill. In other words, it means that despite an imminent change of hands, the brand, “Shoprite” would still continue to exist in Nigeria.

Nigeria is one of 15 Shoprite countries in Africa. In Nigeria, Shoprite operates around 26 supermarkets across the country, with an estimated 1,900 Nigerians on their payroll.

The company claimed that they had taken the decision to leave “following approaches from various potential investors”. The group also confirms that the decision is in accordance with its plans to re-evaluate its operating model in Nigeria.

Shoprite also disclosed in their latest operational and voluntary trading update that an official process to sell its entire stake had begun.

Why Did Shoprite Leave Nigeria?

The true reason behind Shoprite’s decision to exit the Nigerian market is still unclear, but it is likely due to the current economic situation of the country — but there could be more to it.

Firstly, Nigeria, despite its huge population, is a highly competitive space; Retail business is all about the survival of the fittest.

Shoprite disrupted the Nigerian retail ecosystem when it made its entry into the country in the year 2005. But its position as Nigeria’s leading retail brand was not going to last forever.

Previous retail outlets like Park ’n’ Shop rebranded and injected a significant amount of funds into their brand strategy and business expansion efforts.

The rebranding of Park ’n’ Shop happened in 2010, when Artee Group, the owners of Park n’’ Shop, took a bold step in 2010 when it decided to merge with SPAR International to secure the master license for Nigerian operations. Since then, all the new Park ’n’ Shop outlets were launched under the SPAR banner.

With rife competition from homegrown retail outlets like Ebeano, Citydia, and Adiba, it only made sense for them to divest, having held on to the Nigerian operations for seventeen good years.

There are also several challenger retail brands in Nigeria’s commercial capital cities posing a serious threat to Shoprite’s market share.

For some reasons, Shoprite does not publish revenues generated from its Nigerian operations, so I wouldn’t be able to quote actual figures.

Shoprite Failed To Leverage e-Commerce

Local competitors like SPAR and Ebeano additionally offer their shoppers an online shopping experience, in which goods are delivered to their doorsteps. However, Shoprite’s business is modelled around physical store visits.

A Shoprite Outlet in Kano, Nigeria. Credit: AFP PHOTO

Unfortunately, this has remained unchanged for almost two decades, despite the exponential increase in the number of internet users in Nigeria over the past ten years.

As internet services become faster and cheaper, more and more Nigerians would be moved towards leveraging the convenience of e-commerce to meet their shopping needs. Shoprite was leaving a lot of profit on the table by underestimating the power of e-commerce, but the management was perhaps not ready to make that change.

The Xenophobic Riots & Shoprite Nigeria

In September 2019, Shoprite and MTN Nigeria were among the South African brands targeted by angry protesters demonstrating their disapproval of the Xenophobic attacks in South Africa.

While some users subtly boycotted the two South African brands for their alleged quietness on the issue, some more violent groups attacked several retail outlets nationwide.

Shoprite was the worst hit; For example, a Shoprite outlet at Circle Mall, Jakande, was razed down by fire after being looted dry. A few Shoprite outlets also suffered what seemed like a nationwide loot.

Since Shoprite Nigeria does not publicly publish its financial reports, we are unable to determine the true financial damage suffered by the company, but it was an obvious setback.

The Covid -19 Pandemic

As mentioned earlier in this article, Shoprite’s business model is built around physical store visits. As the Covid-19 awareness heightened across various African states, it was almost the end of the era of brick-and-mortar retail.

After several weeks of stay-at-home orders by the government, you’d be forced to ask “what really is the future of physical retail stores?”

Shoprite has dominated the retail market since the mid-2000s, but with the advent of the internet era, a whole new paradigm of sales and marketing changed the retail industry completely. Shoprite was still struggling to integrate this to its business model when the Covid-19 pandemic came, giving it a couple low jabs and upper-cuts.

Nigeria’s current unforgiving operating environment is also another difficult confrontation that Shoprite has quietly faced.

The Muhammadu Buhari-led administration has claimed that it is focusing on “supporting” locally made goods by placing a ban on forex availability for the importation of local alternatives.

This has negatively impacted the number and variety of products Shoprite can feature on their shelves.

Taxes became higher and since Shoprite Nigeria makes money in Naira, they must first convert to dollars before converting back to Rands. As a matter of fact, Naira’s susceptibility to exchange rate devaluation continued to pose a major challenge to the brand.

Two years into the present administration, Nigeria faced a currency crisis. Shoprite narrated that it had about 2.3 billion South African rands (2.3bn ZAR) in cash locked up in Nigeria and Angola due to currency restrictions.

Many foreign-owned businesses in Nigeria occasionally face the same “restriction” which is attributed to limited liquidity in the Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX) window.

In the light of all the challenges discussed above, I think this exit was inevitable.

Shoprite finally bids Nigeria farewell

On the 1st day of June 2021, Ketron Investment Limited — a group of investors under the leadership of Tayo Amusan, who also runs The Palms, completed the acquisition of Shoprite operations in Nigeria, after winning a long bidding war involving three other suitors.

According to Amusan, the Federal Competition and Consumer Protection Commission (FCCPC) has approved a change of ownership, which will now operate a franchise model.

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