Dukas still king in Africa despite rising e-commerce - report

 

Despite the advance in supermarkets and convenience, a huge percentage of consumers in Africa still buy commodities in small retail shops popularly known as dukas in Kenya.

The Future of Traditional Retail in Africa report by Boston Consulting Group shows that 77 per cent of consumers in Kenya buy their goods from more than 250,000 small stores.

This is higher than the continental average of 70 per cent despite the country boasting of rising e-commerce and vibrant supermarket retail chain.

Kenya is behind Nigeria and Morocco in terms of the percentage of consumers still relying on small retail shops.

The report shows that more than 600,000 small retailers account for 97 per cent of national sales in Nigeria.

Modern retail remains very fragmented and is led by international hypermarket brands, such as Shoprite and Spar, and a few small local chains, such as Hubmart, Justrite, Addide, and Foodco.

“Modern chains are struggling to expand due to currency devaluation, underdeveloped and inefficient transportation infrastructure, poor logistics capabilities, inadequate electrical power, and other complex challenges,’’ the report reads in part.

Morocco is the second in the continent in terms of the number of consumers depending on small shops.

According to the report, traditional retailers still account for 82 per cent of sales in Morocco.

They also play an important economic role, since 90 per cent of them offer credit.

This partially explains their resilience despite the expansion of modern retailers such as Marjane, Carrefour, and BIM.

“We estimate that the most affluent 15 per cent of Moroccans account for around 65 per cent of modern retail sector sales,” the survey says

Kenya's retail market has been in a sluggish mode in past three years, with the collapse or exit top brands like Nakumatt, Uchumi, Tusky’s and Shoprite.

“Modern sector growth has been sluggish in the past few years, with players exiting the scene or going bankrupt through a combination of poor management, overly rapid expansion, and in appropriate formats,” reads the report. 

According to the survey, traditional shops will account for 65 per cent to 75 per cent of sales in most of the region and be a catalyst for Kenya’s vision 2030, adding that the expansion of e-commerce and payment services, moreover, might provide small retailers with a new role in digitised trade and payments.

Chris Mitchell, managing director and partner at BCG says the traditional retail sector will remain at the core of Kenya’s commerce for the foreseeable future.

“The nation’s dynamic digital technology ecosystem and the significant penetration of mobile money are stimulating a transformation of both traditional and modern stores. Several factors make traditional retailers remarkably resilient,” says Mitchell.

Small shops offer the proximity, flexibility, and convenient operating hours needed to serve their communities.

They also often allow customers with limited incomes to purchase small quantities on credit.

By comparison, many modern retailers in most of Africa have failed to devise a winning model that can be scaled up to address the needs of most customers. Their locations and value propositions primarily cater to upper-class consumers”.

Yet, traditional retail in Kenya faces many imposing challenges, including the expansion of modern retail, the nascent rise of e-commerce, and changes in consumer behaviour that were accelerated by the Covid-19 pandemic.

The profile of the retailers, their willingness to diversify their businesses in response to a challenging environment, the growing availability of digital solutions from technology start-ups, and supportive government policies will enable dukas to build resilient business operating models.

According to the report, strategies of modern retailers, such as supermarket and convenience-store chains, and solutions provided by tech companies will also influence the future of traditional retail.

In Kenya, for example, 91 per cent of proprietors surveyed by the report in Nairobi and Mombasa are equipped with smartphones, compared with 68 per cent of the general population in those cities.

Eagerness to modernise in response to challenges will also be critical.

In Kenya, for example, the portion of retailers offering remote ordering rose from 27 per cent in early 2019 to 39 per cent in late 2021.    BY THE STAR