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Rwanda Tops A.T. Kearney’s First African Retail Development Index for Market Opportunity


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South Africa ranks seventh due to market saturation

Study provides global retailers with direction on how and when
to enter specific African countries

JOHANNESBURG and NEW YORK, March 17, 2014 /PRNewswire/ — Rwanda, Nigeria, Namibia, Tanzania and Gabon occupied the top five places of the inaugural A.T. Kearney African Retail Development Index (ARDI), a new study designed to help large, organized retailers determine where and how to best enter Sub-Saharan Africa’s rapidly growing retail market. The ARDI is a useful framework for retailers because it not only identifies the markets in Africa most attractive for retail expansion today, but those that offer the most potential in the future. The development of organized retail is a solid predictor of opportunity for other industry sectors as well, such as communications and telecoms, financial services and infrastructure.

“Formal” retail, that which takes place in malls, shopping centers, and other defined trade areas, remains in the nascent stages in most Sub-Saharan Africa countries, limited primarily to a handful of urban areas. Low rates of formal retail coupled with increasing urbanization and the relative stability of many African economies represents massive room for retail growth.

Mirko Warschun, A.T. Kearney partner and ARDI co-author commented, “The top 10 countries in the Index are diverse in terms of scale and growth potential. Retailers must understand where African countries are in the evolution of the retail landscape and the stages of market development to craft their expansion strategies for Africa.”

ARDI Results
The ARDI is based on four elements: Market Size, Market Saturation, Country Risk and Time Pressure, and ranks the potential and urgency of moving into each country accordingly. The top 10 markets in the Index are segmented into three high level approaches: Start with the Basics, Move Quickly and Differentiate.

Start with the Basics: The vast majority of Africa, including Rwanda, Tanzania, Gabon and Ethiopia, has limited market saturation, but also low maturity. While these markets are promising because of favorable demographics and recent growth trends, the main retail markets remain small, scattered and informal. The largest opportunities available in these markets revolve around offering basic consumer packaged products at low prices.

Move Quickly: The countries in this group – currently only Nigeria and Gabon from our Top 10 – have rapidly evolving retail dynamics and demographics, with some established retail players and many other global retailers planning entries. There is no time to spare entering these markets before these first movers gain an advantage as they establish their brands early and secure loyal customer bases.

Differentiate: These markets (Botswana, Namibia and South Africa) have Africa’s most advanced retail sectors as well as an existing presence of international retailers. These markets offer opportunities for retailers that have the capability to deliver differentiated products or formats that are hard to find and appeal to a growing middle class and globally minded citizens.

Bart van Dijk, A.T. Kearney partner and ARDI co-author noted, “There are wide differences in infrastructure and supply chain development across African countries. Understanding the opportunities and limitations from country to country is a critical element of the retail expansion decision.”

By 2020, nearly half of all Africans will be living in cities. As disposable incomes rise, consumer spending will grow to almost $1 trillion. Even with the challenges of entering and succeeding in Africa, the opportunity is impossible to ignore.

“Although there are many challenges, Africa has reached a point in its economic development where global retailers must evaluate the significant potential for growth in this market,” noted A.T. Kearney partner and ARDI co-author Mike Moriarty.

The 2014 African Retail Development Index Ranking and Recommended Approach

Index Rank Country How to approach
1 Rwanda Start with the basics
2 Nigeria  Move quickly
3 Namibia Differentiate
4 Tanzania Start with the basics
5 Gabon Move quickly
6 Ghana Start with the basics
7 South Africa Differentiate
8 Botswana Differentiate
9 Mozambique Start with the basics
10 Ethiopia Start with the basics

To read the full 2014 African Retail Development Index, please go to: http://www.atkearney.com/consumer-products-retail

About the Study
The Africa Retail Development Index ranks Sub-Saharan Africa countries on a 0-to-100 point scale: the higher the ranking, the higher the potential and urgency to enter the country. The countries considered for the rankings were pre-selected based on three criteria – a country risk of 35 or higher in the Euro money country-risk score, population size greater than 1.5 million, and GDP per capita (PPP) of more than $1,000. The ARDI scores are based on Country and Business Risk (25 percent), Market Size (25 percent), Market Saturation (25 percent), and Time Pressure (25 percent).

About A.T. Kearney
A.T. Kearney is a global team of forward-thinking partners that delivers immediate impact and growing advantage for its clients. We are passionate problem solvers who excel in collaborating across borders to co-create and realize elegantly simple, practical, and sustainable results. Since 1926, we have been trusted advisors on the most mission-critical issues to the world’s leading organizations across all major industries and service sectors. A.T. Kearney has 58 offices located in major business centers across 40 countries.

About the A.T. Kearney Global Consumer Institute
The A.T. Kearney Global Consumer Institute is a worldwide network of professionals and executives. The Institute combines proprietary and public data resources with local knowledge to deliver strategic and operational insights to executives in consumer-facing industries seeking long-term growth and competitive advantage. For more information, please contact gci@atkearney.com.

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