Backed by a strong American investor, Wal-Mart’s South African subsidiary, Massmart, announce at the end of July that it was going to launch its first outlet in Lagos, Nigeria, before the end of this year.
This has pushed its continental rivalry with Shoprite, also from South Africa and Africa’s largest retailer by sales, into the west African region.
In a counter move, Shoprite has announced it is going to more than double its outlets in Nigeria to 26 in the next 20 months. The retailer is also looking to open twice as many store in the rest of the continent this year as in 2014.
In an June report on AFKInsider, Shoprite was cited by industry analysts as making better progress in expanding into the rest of Africa than Wal-Mart.
While Shoprite has managed to open more than 150 stores outside its home market in South Africa, Wal-Mart’s subsidiary, Massmart, as only managed to set up 10 since it was acquired by the US retailer five years ago.
Identifying true growth markets in a fast growing sub-Saharan economies has proven rather difficult for Wal-Mart, which was expected to be Shoprite’s tough competitor when it came to regional expansion.
Moving into Nigeria will not be an easy task for Wal-Mart, as Shoprite quickly learnt when it ventured into the oil producing country.
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lack of sizable rental space has always been a tough nut for many retailers to crack in Nigeria, and contributed to the exit of another South African retailer, Woolworth a few years ago.
Shoprite managed to beat this challenge by creating its own real-estate arm, the Resilient Property Income Fund, which announced in 2012 it will invest $12 million in building 12 malls in Nigeria with Shoprite as their anchor tenant.
“Recognizing that risk, by that I mean a severe shortage of shopping infrastructure, Shoprite started setting up warehouses and partnering with developers to build shopping centers and that’s why it is in this quick store rollout phase whereas Massmart is a little bit behind,” Wayne McCurrie, a fund manager at Momentum Wealth in Pretoria, told Reuters.
Shoprite, with operate in about a dozen African countries, has also tailored its model to appeal to different tastes and income levels in the African countries it operates.
These strategies have helped it push forward in a continent that is estimated to be how to two billion people by 2050 and four billion by the close of the 21st century.