The 2019 economic outlook for the bourgoueing retail business is nothing to cheer about as operators have predicted a lull in this business segment, reports TONIA DIYAN
The retail business segment is projected to grow at a low pace this year —no thanks to factors which are predicated on the government’s actions and inactions over the years.
Expectedly, retailers want the government to become more sensitive to the sector’s growth to deal with the teeming population.
A retail and brand consulting, training, coaching and development group, Bervidson Group, owned by Mr Joseph Ebata, observed that the country is projected to grow by 2.3 percent, much of which is likely to rob off on the retail industry.
According to him, amid a global retail industry going through a challenging phase that has seen many store closures, the industry is experiencing a transformation that is driven by changing consumer preferences, heightened competition from nimble new entrants, a rising ecommerce trends, and dynamic socio-political environment.
In particular, as the country heads for general elections next month and with political calculations daily shaping the issues in the socio-political space, visionary business owners and leaders cannot afford to stay aloof.
Ebata, founder of Retail Association of Nigeria (RAN), observed that political uncertainty and downside risks related to the elections and politics are high, likely putting reforms on the backburner and delay the 2019 budget.
The above notwithstanding, the expert said it expected to see growth in the industry. The industry would continue to evolve and retailers would face challenges as they address a highly competitive marketplace and adapt to changing consumer preferences and expectations. Successful retailers would need to have their eyes trained on a various issues affecting the industry and their businesses, he added.
The Bervidson Group chief expects mixed revenue growth. Some organisations would experience revenue declines (negative same-store sales or store closings) and others would continue to increase their top-line supported by favourable sector dynamics such as value retail or via e-commerce and geographical expansion. Growth for leading retail organisations would come from experimenting with store formats, product and pricing mix, mergers and acquisitions, and strengthening e-commerce presence and propositions.
Ebata assumes slow but continued Gross Domestic Product (GDP) growth growth rate is predicted by IMF), expected wage growth arising from minimum wage rise demand by labour (stimulating consumer spending, but pressuring retailers’ margins), and continued significant investment in e-commerce by most retailers. For most retailers thinking growth, some success imperatives would be increasing e-commerce presence and propositions, saving costs in the supply chain, and lowering operating expenses.”
He further assumes also that some retail organisations will fail to adapt to shifting consumer preferences and consumers will become even more cautious and hardwired in seeking value. “We see stiffer competition from aggressive new entrants, rising tax regimes (VAT in particular) and/or more pressure to collect taxes by government that will disrupt retail supply chain economics or raise costs and pressure margins for retailers,” he said.
Bervidson sees the Nigeria retail industry benefiting from many international retailers looking for expansion in new locations around the world in order to gain more profit and bigger market share as they turns their search light on Africa continent as the new global franchise opportunities destination. Same is true for retail technology companies. However, global expansion will benefit more retailers with a solid mixture of local knowledge, appropriate retail premises, a proven business model, significant customer base and appropriate store footprint (size and spread).
It also sees customer experience becoming more important than ever as retailers strive to differentiate themselves in a challenging and crowded retail market. Customer expectations are changing. Today’s customers expect everything to be easy and seamless and right here, right now. Consequently, customer experience will become the new retail currency and experience per customer interaction will be the new critical retail metric to measure success.
Mr Wole Olukunle, Managing Director Osworld Associates Limited , a trade fair and exhibition organising firm, agrees with Ebata.
According to him, the country’s socio-political and economic environment will wear a new look in view of the forthcoming general elections. “The foundations laid by the administration will be consolidated if the same party – APC wins the elections , most especially at the federal level,” he said.
Olukunle said there would be a spiral effect on the economy as the sufferings the people are enduring would gradually lead to a relatively stable and improving economy that will address the needs of Nigerians.
According to him, the leaders in various sectors should embrace the continuity and policies of the administration to give us dividends of democracy.
Olukunle said: “Nigeria is a promising and prosperous nation. If we can collectively work together and earnestly with the resources of this country, taking into cognisance the various opportunities and ahead with open minds , we will move to the next level.”
He said the investment climate would change if certain challenges, such as security, corruption, and fairness were addressed.
“If this is done, everybody will be involved in the running of our economy, which will lead to business development and growth.Thus, our economy will attract foreign investors. I have a strong believe that Nigeria will be great again,”he stressed.
Socio-political and economic environment post-2019
elections
On how the socio-political and economic environment will look like in post- 2019 elections, Vivian Iweha Digital Marketing/Public Relations Manager, Herbal Pro Limited, producers of EZ Slim weight loss, said the country would first have a discovery period. He added that usually this is what happens after a period of uncertainty caused by elections.
‘’Once things settle down, we hope to see a more stable economic environment which will definitely continue to climb through the second and third quarters,” she said.
For Chief Tokunbo Omisore, the Chief Executive Officer, Top Services Limited, architects, project managers, developers and part owners of Neighbourhood Shopping Malls, “The country, regardless of who resides in Aso Rock, will struggle. The naira will be under pressure (CBN intervention has increased), oil prices are under pressure, global interest rates are on the rise and an economic slowdown is a distinct possibility. All these portends higher inflation, tight budgets and slower growth.”
Response from retail leaders
On how retail leaders should be responding, Iweha said they should make use of the opportunity offered by the elections, saying once people were sure of what the next four years would be like, they could start budgeting and buying unlike the period leading to an election where the purchasing power reduces as people are saving more than spending. “Herbal Pro is making use of this period to put our products in the eye of the public so we can hit the ground running,” she said.
Iweha does not seem to see any challenges in the new year. She foresees a lot of growth opportunities in the year instead. She is certain that new businesses will open and more people will add more income-generating opportunities to the economy. The demand for goods and services will increase also, she said.
Omisore said retailers should pull back on the non-discretionary items. Consumers, who will be under strain across all economic strata, people will be constrained to buying fewer discretionary items and focusing on necessities.
The investment climate
Right now, it is a little slow as people are waiting for the elections to be over. Most companies have concluded studies and surveys on new ideas and are only waiting for the conclusion of the elections. “Once that is done, you will definitely be amazed with the new innovations and concepts that will find its way into the economy,’’ Iweha said. He added that her company is not left out, “as we are in a testing period also and soon along with other proactive businesses, we will make a debut of our new ideas”.
Omisore said: “Fewer capital investments will be made as investors observe how the government handles the economic situation.”
Policies likely to shape issues
Investment policies and consumer protection policies will shape in the year. Iweha said: “I see business becoming more responsible with their customers and their products as well as investors looking for new and innovative ideas to invest in. There will also be an influx of internationally acceptable laws policies to ensure a smooth operation for investors and guides that will benefit the consumers. Herbal Pro has encountered some of them in our bid to expand our product range.”
Omisore said interest rates, inflation, exchange rates and restructuring would affect the industry.
Foreign investors reactions
“They will be glad as there is a lot of business interests in Nigeria. You will see lots of companies bringing in new products and innovations as well as new start-ups springing up,” Iweha said.
In Omisore’s view, foreign investors will wait to see how the government deals with the economic situation.
Implications for retail
business development and growth
“The retail business will add more to the Gross Domestic Product (GDP) in the year,” Iweha said.
For Omisore, there were unlikely to be new players in the market and that price competition would push out the neighbourhood stores or force them to change their business model.
In all, experts argued that there would be growth opportunities and challenges ahead as businesses that were able to provide lower cost substitutes for imported items will thrive.
But whether these predictions would materialise remain to be seen.