What Shoprite exit means for Nigeria’s retail market, property developers
The planned exit of Shoprite, arguably Africa’s biggest grocery retailer, from Nigeria has negative implications for the country’s already struggling $105 billion retail industry and also space suppliers, experts have said.
The South African retail chain has planned to leave Nigeria, citing Covid-19 pandemic and the group’s reevaluation of its operating model in Nigeria — Africa’s thriving market and the continent’s largest economy.
The coming of Shoprite is almost synonymous with the growth of retail market in Nigeria which, at a time, witnessed what could easily be described as a revolution with some foreign investors, at the time, planning to invest $500 million to finance the development of six retail malls in five major cities.
Shoprite is not only strategic an anchor tenant in most of the trail outlets in Nigeria, but also a trade booster to other retailers in a given mall. This is why Cheng Fuller, a retail expert, reasons that apart from the large number of jobs that will be lost, other stores within the same proximity of the store (Shoprite) could suffer further.
“When Shoprite came in, they provided a source of tourism or relaxation called shoppers’ tourism. 60 percent of people who went to Shoprite did not just go for their price, but for the tourism and from there, they will be tempted to do impulse buying. And now in this pandemic, their major business model which is large crowds has back up against them,” Fuller said.
He explained that other stores close to Shoprite would suffer more because Shoprite is the anchor tenant for the stores; now that they are leaving, those stores will die a natural death. He added that there is also the problem of unemployment as Shoprite employs about 10,000-13,000 people across the country.
The exit of Shoprite would mean that developers or space suppliers would suffer in many ways. Apart from increased vacancy rate in the retail market which averaged 30 percent across cities by the last quarter of 2019, investment in mall development which is already low, will drop further.
Interestingly, many of the retail mall or space suppliers are South African developers and investors. Most prominent among these investors is RMB Westport, a joint venture between Rand Merchant Bank (RMB) and
Westport Property Group— a highly skilled real estate investment management company which was reported to be funding about 51 percent of Osapa Mall and 50.5 percent of 30,124 square metre Royal Gardens Mall.
Another investor is Resilient Africa, a South African partnership between Resilient Properties, Shoprite and Standard Bank, which developed four of its choice malls in Delta, Benin city, Owerri and Asaba.
While these investors would have a lot of empty spaces to contend with, letting agents and facilities managers would also have a bite of the bitter pie. Broll Property Services, also a South African firm, which has been providing both letting and facilities management services to these malls, will suffer some shock in its bottomline.