While online retailing in South Africa is growing and attracting increasing attention from marketers and consumers, it still accounts for only a tiny percentage of overall retail spending in the country. This is one of the most notable findings of a study released yesterday (Wednesday). According to the Online Retail in South Africa 2016 report by Johannesburg-based technology consultancy World Wide Worx, e-commerce spending will total around R9-billion. However, this is still only 1% of total retail spending. “While 1% represents a very small proportion of overall retail, it is also a psychological barrier for investment in e-commerce initiatives by physical retailers,” said Arthur Goldstuck, MD of World Wide Worx and principal analyst of the survey. “The number also masks the extent to which a number of major retailers have exceeded the 1% online mark by a substantial margin, compared to the vast majority that are not yet close to this mark – if they have an e-commerce presence at all.” Goldstuck noted that online retail in the country is often viewed as being undeveloped and lagging behind the major international markets. “Even retailers themselves use this kind of terminology; however, this often also results in an underestimation of the healthy growth rate of online retail in this country.” He said it should be borne in mind that much of this growth has come as a result of an increase in the number of experienced Internet users in South Africa who are ready to transact online, rather than the retailers themselves getting it right and convincing shoppers to spend more on e-commerce. The study forecasts that by 2020 local online retail sales will double
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Non-military drones will almost certainly populate African skies within the decade, providing solutions to many supply chain challenges and creating new marketing opportunities. ‘Strategic Marketing Africa’ the magazine of the African Marketing Confederation (AMC), report in its latest edition (Issue 1 2016) that an effective supply chain and delivery process is vital in the age of online shopping and e-commerce. Yet, for many businesses in Africa, weak links in this process remain a stumbling block. Large, unmanned cargo-carrying drones could be the solution, the magazine quotes Indrek Heinloo, Global Chief Executive Officer of logistics company, AIG-Express, as saying. “Small helicopter-type drones with small payloads and limited range are useful for so-called ‘last-mile’ (final) delivery in highly developed places with good infrastructure. But they would be ineffective as logistics tools [in Africa],” Heinloo says. Instead, he visualises drones with large payloads of up to 300kg and ranges beyond 500km being used for ‘middle-mile’ (mid-range) deliveries. The craft would require small airfields for take-off and landing, with control points at both ends of the journey and various localised methods of last-mile delivery to the end customer. This is already starting to happen in Rwanda, where the Redline Droneport project is underway. A partnership between Swiss-based Afrotech-EPFL and the UK-based Norman Foster Foundation, the project will eventually comprise a network of droneports serving as bases for a fleet of small fixed-wing drones. These will transport mainly emergency medical cargo, but thereafter the plan is to introduce larger drones with a 100kg payload and 100km range by 2025. The large drones will help to subsidise Redline’s humanitarian activities by carrying commercial cargo for fee-paying clients. “The commercial use of drones for delivery to customers in Africa is feasible … as the technology develops, it is going to become far more common,” supply chain expert Martin Bailey tells ‘Strategic Marketing Africa’.
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Amidst the challenges of limited Internet connectivity and unreliable connections, the Global Connected Commerce Survey by research company Nielsen has found that Nigerians’ use of mobile devices to make online retail purchases is significantly higher than the global purchasing rates across several categories. “This points to the fact that an e-commerce experience is the new retail reality, as digital devices enable Nigerian consumers to shop wherever and whenever they choose,” says Nielsen. “The shift towards mobile purchasing reflects a larger trend that is occurring in retail: proximity shopping. Across all regions [covered by the international survey], smaller format stores that are close to work or home are growing fastest, and nothing offers greater convenience or proximity than the mobile device in consumers’ pockets.” The study says that, as more consumers adopt an ‘on-demand lifestyle’ and turn to mobile devices to shop, the most successful retailers will be those that optimise and differentiate their mobile services as a way to enhance the in-store experience of shoppers. It found that three quarters of Nigerian respondents (77%) who are Internet connected have used their laptop, and 46% their smartphone, to purchase packaged grocery food. Other popular online buys include beauty and personal care products, fashion-related items, restaurant/meal delivery services, travel-related products, and books and music. When it comes to the types of activities potential shoppers engage in online, 50% of Nigerian respondents said they looked up product information, followed by 32% who said they used the Internet to compare prices. A total of 31% said they looked for product reviews. When engaging in online shopping, cash-on-delivery and debit card payments are the most common form of payment methods (76% and 59%) for Nigerian online shoppers, with direct debit from a bank accounting for 38% of payments.
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Thursday, 31 March 2016 07:55

How many new shopping malls can SA sustain?

How many more shopping malls does South Africa need, given the low rate of economic growth and slowing consumer spending? With the massive new Mall of Africa due to open in Midrand at the end of April, some experts are at odds as to whether more large-scale retail developments are needed. The Mall of Africa, with a size of 131 000 square metres the largest single-phase mall development on the continent, will be the anchor development within Waterfall City, a largely self-contained mixed-use development that includes residential areas, retail facilities and office complexes. When the mall opens on 28 April it will have an estimated completion value of R4,5-billion and its developers claim it will attract 15-million people a year. But Patrick Flanagan, head of development company Flanagan & Gerard, has told ‘Business Day’ newspaper that developers need to be careful. “There are many shopping centres that have been announced which just won’t be sustainable in certain areas. Quite a few smaller centres are difficult to tenant in a slow-growth economy,” he said. According to Flanagan, while many smaller centres are struggling, large centres sized about 90 000 square metres and more are performing well. This was because planning for these centres was usually better. But Dirk Prinsloo of Urban Studies, a market research company specialising in shopping centre research, told the Financial Mail magazine that, although consumers are under pressure, “the [shopping centre] cake is getting bigger, with growth taking place in the emerging market. We have about 5-million additional households and tremendous [potential for expansion] in the retail space.” He said the mall boom was due in part to the trend of people moving to cities to get jobs, altering the complexion of society from a far more rural-based existence. “Urbanisation now sits at 64%, and it will grow to at least 68% by 2030,” he noted.
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They love their barbecues in the American South, but are they likely to take to meat braaied in the South African tradition? Chesa Nyama, the fast-food franchise that specialises in serving grilled meat that appeals to South African palates, is betting that Americans will like the concept and is now in the process of planning its first US outlet in the southern state of Tennessee. Gold Brands, the SA master franchisee, will own 30% of a US-based holding company set up to market Chesa Nyama in the United States. The remaining 70% will be split between two US investment partners, Red Hornbill and The White Family Partnership. The first outlet is likely to open in October this year. Gold Brands will not provide capital, but will give strategic and logistical support for the development of the product lines, branding and menu. Chesa Nyama takes its name from ‘shisha nyama’, which is Zulu for ‘burnt meat’. In South Africa the brand has more 300 franchise outlets and also has a presence in neighbouring countries such as Namibia, Zimbabwe and Mozambique. Gold Brands this year listed on the Johannesburg Stock Exchange. “We have long had a dream of taking Chesa Nyama beyond the borders of Africa. The idea has always been to bring our iconic South African braai culture to America,” Gold Brands Chief Executive, Stelio Nathanael, said in a statement. Dr Ray White, representing The White Family Partnership‚ noted in his own statement: “As an African-American with a great love of Africa and having done so much work in and made investments in Africa‚ I love the South African braai culture and we are very excited to bring a brand such as Chesa Nyama to the USA. It truly is a South African success story due to its traditional menu and great value for money offer.”
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Mauritius, the island nation frequently rated as Africa’s most competitive economy, is looking to increase its profile in the Asia-Pacific region and market itself as a trade and investment hub for Asian companies looking to do business in Africa. It also sees potential to increase tourism links between Asia and Mauritius. On a recent state visit to Singapore, the Deputy Prime Minister of Mauritius, Charles Gaetan Xavier-Luc Duval, invited Singaporean businesses to use Mauritius as their regional headquarters from which to invest in mainland Africa, reports the ‘Straits Times’ newspaper. “Africa is waking up, everybody is concentrating on Africa [and] everybody sees Africa as a major growth pole. And Mauritius is just sitting off the coast of Africa,” Duval said. “The potential between these two hubs is enormous, because trade and investment between Asia and Africa are bound to grow exponentially.” Duval said another important component of the vision for Mauritius was to transform it into a ‘smart island’. “Our government is therefore encouraging projects involving smart cities and new cyber cities that will include techno parks,” he noted in a speech to Singapore’s business community. The state visit coincided with the launch of non-stop flights between Mauritius and Singapore, as well as a Mauritius-Singapore business forum. Previously Air Mauritius flew to Kuala Lumpur in Malaysia, but the website ‘Orient Aviation’ says that Changi Airport in Singapore has greater ‘marketing might’ and has undertaking to promote Mauritius through channels such as fairs and roadshows. In a separate report, Bloomberg news agency said that Mauritius was marketing itself as an international financial centre as it looked to Asia and the Far East for new business.
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Wednesday, 23 March 2016 10:10

Hard Rock believes Lagos is still rocking

Hard Rock Café, the global chain of themed rock ‘n roll restaurants, is betting that despite a slowing economy the people of Lagos are still intent on having a good time. The US-based company, which also operates hotels and casinos, opened its first Nigerian venue last week to complement its other African outlets in South Africa, Egypt and Tunisia. “Nigeria is more than ready for us,” Hamish Dodds, the group Chief Executive, said in an interview with Reuters news agency. “People here love a good time, they love music and good food, so it just makes sense to [come] now.” While acknowledging the country’s current economic problems, Dodds noted that it had a large population, a lot of wealth and was an engine of economic growth on the continent. “Ultimately I think our investment is based upon the expectation that there are other elements to the economy [other than oil] and that people are going to come to our brand and come to our business.” In a separate interview with Reuters, local banker Tolu Okojie noted: “When the economy is going down, drinks and food keep selling, so it depends on how they (Hard Rock Café) manage themselves.” The Lagos venue is located in affluent Victoria Island and includes a casual dining restaurant with more than 200 seats, a stage for live performances and a swimming pool area for adults and children. Hard Rock Café was founded in London in 1971. It now operates in 60 countries and has 158 cafés, 22 hotels and 11 casinos.
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Africa could have a far higher concentration of ultra-rich individuals in the next decade as a result of economic growth caused by new investments, entrepreneurship and innovations flowing in from other parts of the world. Indeed, the number of super-wealthy people on the continent is likely to rise by 54% between now and 2025 – ahead of the global average of 41% for the same period. This is according to the Wealth Report 2016, published by global real estate firm Knight Frank. The Africa component of the study was unveiled in Nairobi last week by the company’s regional Chairman, Peter Welborn. “There is a tremendous inflow of capital from all parts of the world into Africa and this phenomenon has created a new class of super-wealthy individuals. The trend will continue despite several risks,” he said. The report defines ultra-high net-worth individuals as those with assets of US$30-million and upwards. Kenya, South Africa, Nigeria, Angola and Egypt are the countries on the continent with the highest concentration of these individuals. “Homes comprise an estimated 22% of assets owned by Africa's super-wealthy and they have allocated 33% of their portfolios to liquid investments such as bonds and equities,” Knight Frank said. The report added that collectables such as wine, art, antiques, jewellery and classic cars are expected gain popularity among the continent’s rich individuals in the coming decade. Bloomberg news agency, quoting the Knight Frank Wealth Report 2016, said the profile of a rich African was shifting from older males to younger Millennials who had found new ways to make and keep money in a changing global scene. “Younger, better-educated people are joining the super-rich African club and they’re bringing fresh, non-traditional ways of growing and spending their money, said Andrew Shirley, Editor of the report, at the Nairobi press conference. In a continent with challenging transportation, more ultra-rich Africans were buying jets, he added.
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Wednesday, 09 March 2016 07:36

Kentucky fried – but no fries with that

It’s a case of Kentucky fried rice in Nigeria right now, as KFC and other fast-food restaurants switch their menus from offering French fries to providing rice with customers’ meals. The problem, according to a report in the respected ‘Wall Street Journal’ newspaper, is a lack of dollars to import potatoes. “So we offer rice,” the newspaper quotes Aditya Chellaram of Chellarams PLC, Nigeria’s KFC franchisee, as saying. Chellaram has trained cashiers to explain foreign-exchange restrictions to irate customers. Nigeria doesn’t have enough commercial potato farmers or processing plants to make up the difference. “It will take years,” he told the ‘Journal’. “US dollars have become increasingly scarce over the past 18 months as global oil prices crashed, depriving Nigeria of most of its export revenue. So the central bank has toughened rules governing how easily businesses can purchase them,” the newspaper explains. Authorities are now encouraging businesses to purchase from local manufacturers instead of importing. Ultimately, it is hoped that this will encourage more local industries to develop and reduce the country’s oil dependency. However, this is creating a number of short-term challenges for consumer-facing businesses. Notes the ‘Journal’: “Manufacturers say his approach is fraught with problems. For example, the central bank won’t sell pharmaceutical factories dollars to import bottles, because it wants them to buy from local glass manufacturers. The catch: Local glass factories don’t produce the kinds of bottles pharmaceutical companies need, said Muda Yusuf, Director-General of the Lagos Chamber of Commerce and Industry.” Similarly, food makers have been told to buy palm oil from local farmers. But Nigeria doesn’t currently produce enough of the palm oil its packaged-food factories require. That doesn’t seem likely to soon change: “Palm trees take years to grow,” Yusuf is quoted as saying. The ‘Journal’ said the country’s central bank would review the impact of its policies before the next monetary-policy meeting in May.
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Ethiopia and Ivory Coast are the countries offering the best growth prospects in sub-Saharan Africa this year. They are followed by Mozambique and Kenya. Nigeria, once regarded as highly promising, drops into fifth place as a result of a slowing economy caused by low oil prices. Also hit by oil pricing is Angola, which was previously ranked fifth in terms of growth prospects, but now drops dramatically to 16th position – behind countries such as the Democratic Republic of Congo (DRC), Zambia and Senegal. This is according to the African Prospects Indicators report released this week by research company Nielsen. The ratings for each country are based on macro-economic, business, consumer and retail factors. Bottom in terms of growth prospects are South Sudan, Mali, Burkino Faso and Swaziland. The countries ranked as the top four remain unchanged from the previous business survey and are considered ‘good’ growth prospects, says Nielsen. It also notes that business sentiment has dropped in Kenya, DRC, Congo, Zimbabwe and Zambia. “The majority of the countries which scored at lower levels have experienced ongoing instability which is reflected in a more cautious business outlook,” the report notes. The Consumer Prospects Indicator contained in the report raises several red flags for marketers and notes that cash-strapped consumers are a reality in the region. “On average, food accounts for 30% of the African consumer’s basket, with this figure increasing to as much as 43% and 45% in Ethiopia and Angola. For consumers living in more impoverished conditions, the inflationary pressure on a basic basket of commodities is [even] more keenly felt.” According to the Indicator, a like-for-like basket of essentials costs almost US$34 in Angola and US$27.50 in Ghana, compared to South Africa at US$15.33. “As consumers struggle with rising overall expenses, product choice is of vital importance. Consumers are most likely to buy brands which are known, familiar and trusted. Fifty-seven percent also say they will buy brands that they have tried before. On the surface these factors appear as strong loyalty determinants, and more important than affordability or price,” says Nielsen. “In reality, this is a more likely indication of leaner financial times and cash-strapped consumers not being able to afford costly mistakes.”
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