The economy in Sub-Saharan Africa continues to grow.  A handful of the 10 fastest growing economies in the world are in Africa, it has the world’s greatest population of young people and the number of middle class consumers – estimated to be 350 million – is booming. With such a growing, promising market, comes great opportunity for retailers. But, one of the major challenges for retailers doing business in the continent is navigating the complexity of the retail environment. Nielson has recently released a report examining the African retail environment and provides some helpful insights for retailers operating in or looking to break into this regional market.

The report suggests retailers must:

• Understand “who shops where and for what”. The investigation found that the number of sales made through modern trade outlets is relatively small. Modern trade is generally at an early stage of development and although Africa is a “land of opportunity”, it has a highly fragmented retail system. Across the 7 Sub Saharan states studied, Nielson found that, on average, 80% of consumers shopped from “table tops” and many also shop in small, local grocery stores. Top-selling new products can struggle to build distribution in traditional outlets. “Even companies poised with the right products for the right market still often fail to get them to the right place.” The report recommends that companies focus on understanding the retail landscape to help shape an effective distribution model.

• Identify the right retail outlets. In a case study in Nigeria, it was found that just a handful of outlets accounted for a large proportion of sales of particular products. For example, in Lagos, beverages are sold in 61,000 outlets, but 24,000 of these outlets generate 80% of sales. Identifying key retail outlets in local markets is essential to sales growth.

• Build demand. Nielson recommends that, once manufacturers have established a distribution strategy, they should look to the local market to learn how to execute sales in traditional outlets. Local vendors are “masters at adapting their offerings to meet consumers’ immediate needs” and traditional sales operations “must be understood by a manufacturer that wants to introduce its product to the table top market and develop its success”. Meeting consumers’ needs includes thinking about the required pack size, format, affordability and denomination.

For retailers with high-end products, which are unlikely to be sold in traditional outlets, we suggest that broader lessons can be drawn from this report. Africa’s wealthy population is growing and to succeed in the region, retailers need to understand where consumers are shopping, identify appropriate retail outlets and examine local operations to understand how to appeal to end-consumers.