Possibly Reason ShopRite Choose to Exit Nigeria Retail Market

Tekmedia

Shoprite joins two other South African retailers, Mr. Price and Woolworths who have also announced exists from Nigeria in August last year due to a harsh operating environment.

ShopRite has about 26 outlets in Nigeria, with over 2,000 employees of which 99% of them are Nigerians.

Earlier this week, ShopRite also announced that they have concluded every process of divesting their all their outlets in Nigeria to the new stakeholders.

A divestment means it will sell it's holdings to another investor(s) who will continue to run the business.

But the question now is, why is ShopRite, the largest Africa retail stores leaving the largest economic country in Africa?

Without doubt, retail in Nigeria is the survival of the fittest. With competition from all angles including individuals doing mini importation and other online retailing.

Below are the possible reasons why ShopRite is exiting Nigeria market:

1. Competition: ShopRite joined the Nigeria retail market in 2002 when there was less company competing with their nature of store, but things have not been same especially in recent years.

With the likes of Park n Shop now Spar with 14 outlets in Nigeria competing with them, most especially in the country's commercial city of Lagos where the likes of Adiba, Citydia, Ebeano, Robban etc. are always pulling their shoulders high.

2. Online Shopping: In marketing, technology is always the greatest threat. Advance in technology and way of living didn't leave the retail sector behind. And the current Covid-19 restrictions have affected businesses. Competitors like Spar and Ebeano is already offering online shopping and home delivery to their customers, making it more difficult for shoprite that do not offer that to maintain their sell margin. And then, there are Jumia, Kings and others that are mainly online stores offering doorstep delivery at more affordable price.

Shoprite, which has spent 15 years in Nigeria stated that customer visits for the year declined by 7.4% due to the pandemic lockdowns. It also noted that outside South Africa, sales only increased by 0.1%, and an overall decline in sales of 1.4% for the year.

3. Harsh Operating Environment: The current Buhari led administration effort to support locally made products have made the CBN to ban the importation of some foreign products, which have totally reduced the number of products shoprite can sell to their customers. Since they sell on a very thin margin, it have massively affected their revenue. Also, they company makes money in Naira and must convert to dollar before converting back to South Africa currency Rands. And the high taxes and Nigeria susceptibility to exchange rate devaluation is also a major challenge to the South Africa store.

These and many others are the possible cause of ShopRite decision to exit the Nigeria retail market.

ShopRite entity in Nigeria is worth about 1.1 billion Rands (which is N24 billion in Naira) according to their financial statements, and could worth more when the sale is eventually consummated.

Tekmedia operanews-external@opera.com