Re-imagining the retail sector in the age of disruption

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By Olga Kiconco, Lead Innovation Strategy & Consulting
The Innovation Village

It is believed that as early as 800BC during Ancient Greek time, retail trade was already well established in the Angora City Centre.

Certain days and places were designated for open markets where the local peasants accessed consumers who wanted to exchange their surplus items to buy what they needed to run their productions.

Over time, the means of transaction evolved from barter trade to the Shekel was introduced and used in Modern Iraq as a measurement of weight followed by the small retail stores independently owned by families commonly known as “mom and pop” stores. Majority were drug or general stores selling a variety of goods such as groceries, fabrics and tools.

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Fast forward to the late 18th Century, shopping markets and arcades emerged across Europe to attract the middle class and sold luxurious goods.

Window shopping surfaced from the long glass used in exterior windows of stores which would propel the middle class to see the shop items from outside without necessarily entering the shop.

Retail stores in the past provided general services by either selling directly to the final consumer through a company owned store or by commissioning an agent who delivered the manufacturer’s goods to shopkeepers who would in turn resell them.

In a move to come up with a better retailing option, the model evolved to discount departmental stores, shopping centers and large malls.

Out of all these, the discount department stores registered more sales with new consumers willing to try the cheaper option offered by these stores.

Today, the rise of the internet has presented consumers with a variety of retailing options, being able to compare prices quickly and unlimited shopping hours among several other benefits. Online shopping enables consumers to buy goods or services from the sellers at the tip of their fingertips.

In Africa, consumers have significantly fostered the growth of retail trade by adapting to the western style shopping malls that have changed their shopping experience away from the small neighbourhood stores and open markets.

South African retailers like The Foschini Group, Shoprite Holdings and The SPAR Group have expanded within Africa and as far as Europe and Asia Pacific to tap into the areas with an established consumer base.

In the late ‘90s, Africa embraced the idea of diversified departmental stores with Game opening up its stores in 12 other countries other than South Africa .

Over the years, a number of drivers have influenced the rise of retail trade in Africa including technology, a growing population and rapid urbanization which translate into bigger opportunities for the sector.

The Africa Growth Initiative at Brookings reports that more than 40% of Africa’s population reside in the urban areas and it is estimated that by 2030, Africa’s largest cities combined will have a spending capacity of $1.3 trillion.

Africa is also home to the youngest population in the world with approximately 70% of Africans under the age of 30; an age group that is aware and eager to consume new products.

Rapid urbanization has made it easy for retailers to target niche demographics and markets – which are vastly different across the continent and thus the retail market opportunities also vary due to the consumer taste, culture and income.

On the other hand, as the sector emerges, retail entrepreneurs in Africa have experienced a significant number of setbacks including high competition, with most players occupying the same physical and economic space, while competing for the same market.

Local businesses compete with foreign players, who typically have better access to low interest capital from high value currency countries.

Most African countries therefore have a major trade deficit as they typically import more than they export; which in turn has a major impact on the cost of doing trade business on the continent.

Lastly, local retailers have access to very limited distribution channels and many have not explored alternative ways through which they can source supplies.

Adding fuel to the fire, the aftermath of COVID-19 on Micro, Small and Medium Enterprises (MSMEs) – engines of economic growth, job creation and innovation in Uganda that account for about 90% of the entire private sector, generating over 80% of manufactured output with the retail industry averaging about 18% in gross domestic product (GDP).

The Uganda Business Impact Survey 2020 reported that about 4,200 companies in the country shut down because of low cash inflows brought about by various lockdown measures.

At the onset of the pandemic, China was forced to shut down its factories resulting into a ripple effect as global supply chains were disrupted and nationwide lockdowns led imports to plummet, as well as shortages drove up prices of goods.

Most retailers experienced a drop in their sales due to low demand for their products especially from walk-in customers and low purchasing power.

The challenging business environment forced retailers to reduce their operating expenses including laying off staff, further exacerbating the youth unemployment challenge.

A number of factors have prompted paradigm shifts that will influence the Future of Retail, some which include digital transformation, business resilience and diversification of supply chains.

Uncertainty surrounding the pandemic has created an opportunity for the nimblest businesses to innovate and scale alternative digital channels to remain connected with their customer base.

For example, SafeBoda Shop has catered to small retailers to list their products during the lockdown and carry out seamless transactions and ran campaigns for brands listed on the platform to increase their visibility, to inadvertently boost their sales.

The Medical Concierge Group (TMCG) championed telehealth and telemedicine in Uganda by leveraging Artificial Intelligence (A.I.) to conduct remote medical consultations.

Their commercial online store for healthcare and lab services, Rocket Health has disrupted traditional healthcare retail through delivery of medicine, refills and routine lab testing for patients in the comfort of their homes.

Disruption in global supply chains have forced countries to look within, creating an opportunity for the growth of the local manufacturing and creative industry to drive import substitution.

One of the emerging makerspaces in Uganda is MoTIV with production facilities spanning various manufacturing sectors in Metalwork, Woodshop, Mechatronics, Media, Textiles and Food Technology.

MoTIV brings together young creatives through collaborative working, design, social innovation and new learning models through Do It Yourself (DIY) in a bid to democratize local manufacturing, boost digital transformation, support vocational and STEAM education.

Over the recent decade, the rise of technology and smartphone adoption has created a new reality for the future of work where people, especially the youth can potentially make money from temporary work engagements commonly known as ‘gigs.

The pandemic could potentially help the emerging gig economy to flourish, directly connecting one to customers who need a specific task accomplished or clients need a certain skill to execute a certain project. Ideally, this new ‘work arrangement’ will enable MSMEs to inexpensively hire missing digital capabilities to perform specific tasks or work on projects as they adapt to the new normal.

We will delve further into how players in the retail industry can position themselves to take advantage of the Future of Retail, during the launch of our sector insight report on Thursday 5th November, 2020.

For more information, email info@innovationvillage.co.ug

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