Retailers forget Africa is where the money is

The collective amnesia of South African retail management teams has been nothing short of amazing as their brazen approach to foreign lands has left many with their tails between their legs.

And it seems that those who have watched from the sidelines while their peers got burnt are willing to take risks of their own.

Last week Durban-based retail group Mr Price announced its foray into Poland, a retail haven for South African discount retailers seeking markets for growth. The group announced that a Home Test store would be opened in Poland between October and November as part of the company’s search for international acquisitions to assist diversification.

For almost three years Mr Price has been noncommittal about its international strategy, especially after it was forced to consolidate three apparel stores into one outlet in Australia.

One analyst went so far as to describe Mr Price’s expansion Down Under as its “figuring it out” moment.

A note by JP Morgan’s Stephen Carrott and Dina Constantinou said the fact that no decisions had been taken in Australia was proof the group was still in concept stage, following management’s acknowledgement that logistics supply via South Africa was not working.

JP Morgan, which also happens to be the second-largest institutional shareholder in Mr Price, flagged its caution on the outlook for the group in the financial year 2019, calling it uncertain.

But given its experiences in Australia, Mr Price is likely to be circumspect when it comes to the Polish market. Poland is an attractive market for its growing population and euro-based currency, all of which could be a winning recipe for Mr Price, but Poland alone shouldn’t be where the retailer focuses its efforts.

As Africa prepares itself for a second wave of expansion, it’s going to take a retailer with real chutzpah to go into the uncharted territories of Francophone and Arab Africa. Given that these markets are already undergoing rapid development, the appetite for growth may result in them soon becoming some of the most sought-after markets in the world.

Many retailers placed all their bets on populous Nigeria and entered the market with woeful arrogance. They got burnt as consumers showed no interest in their offerings.

While the joint-venture approach has been seen as the key differentiator between those who survive Africa’s retail markets and those who don’t, the primary differentiator of growth will be who gets in first and does not enter these markets with preconceived notions but rather is willing to learn from local operators.

So as South African retailers mull over the idea of creating an international presence, perhaps they shouldn’t even look as far as Europe but wait for the perfect opportunity to come back home because, after all, home is where the heart (and in this case, the money) is.

South African groups creating an international presence shouldn’t look only to Europe