Failure in Nigeria is often due to poor business strategies by Dianna Games


The day Woolworths announced it was pulling out of Nigeria, I met a Nigerian colleague at a coffee shop in Sandton City, within sight of the chain’s shop there.

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Woolworths has pulled out of Nigeria.

Woolworths has pulled out of Nigeria.

A former resident of South Africa, he knows the brand well and planned to shop there after our meeting to buy clothes for his children back in Lagos. He said he had never visited either of the two Woolworths outlets in his home town, despite the fact one was not far from his house.

A banking executive, he represents the middle class in the rest of Africa that South African retailers are relying on to boost their sales. But he said Woolworths’s marketing was poor in Lagos, despite being a new and unfamiliar brand to most Nigerians, and he had simply forgotten it was there. Because South Africa’s retailers are household names at home, there seems to be an expectation that Africans elsewhere will be familiar with the brands. This is not the case.

Wealthy Nigerians travel extensively, but their favoured shopping haunts are in the UK and US. As a result, they are more familiar with the down-market Woolworths brand in the UK that went out of business a few years ago than with the more upmarket brand so beloved by South Africans.

I have also been told that the layout and ambience of Woolworths shops, well accepted at home, led Nigerians to believe the goods would be expensive. Cost is an issue with this much-trumpeted new emerging middle class, the bulk of which is at the more unstable end of the definition.

Although incomes are expected to grow over the next decade, many consumers are battling with high personal debt, rising electricity and transport prices and chronic unemployment.

Nigerian consumers are brand savvy. If they are going to pay higher prices for goods, they want global brands they recognise; brands that tap into their aspirations. Woolworths, and some of South Africa’s other clothing retailers, simply do not fit into that category. That makes their marketing job more difficult — but not impossible.

A challenge for retailers is the lack of critical mass of malls. There are less than a dozen malls trading in Nigeria at present. This is not enough to change the mass of peoples’ entrenched shopping habits, particularly as these retail developments are far apart and inaccessible to many, particularly in the highly congested megacity of Lagos, where South African retailers are concentrated.

Shopping is done mostly in covered and uncovered outdoor markets, ad hoc stalls along the streets and small two-or three-storey shopping centres with a multiplicity of small shops, commonly known as plazas.

As the number of malls increases (there are about a dozen under development), more people will patronise them and their popularity will increase.

Nigeria is a tough operating environment and it is necessary to learn to work within its challenges in order to succeed. Despite significant reform over the past decade, it is still structurally inefficient and that is unlikely to change soon.

Understand the local environment

Companies investing there have to understand the minutiae not just of the risks and challenges but of the market, the culture and the consumers. Models have to be constantly fine-tuned and adapted.

There are myriad other challenges in Nigeria and the government has been slow to tackle key issues affecting investors.

But it is glib to blame a country for a company’s failure to make an investment work rather than the firm’s own strategies, unsuitable models, poor choice of partners and so on.

Woolworths’s withdrawal from Nigeria, and that of Nando’s, Telkom and others, should not be interpreted as a story only about Nigeria’s challenges but also about specific problems created by the choices the firms themselves made.

Shoprite has “paid its school fees” but it has also enjoyed some of its highest turnover in Africa in its Nigerian stores. Mr Price reported its second-best opening turnover in the company’s history when it launched in the Ikeja City Mall in Lagos (down the concourse from Woolworths). The MTN story in Nigeria is legendary.

Other South African retailers are coming into the market, such as Edcon, with food franchises right behind them. Despite the slow growth of formal retail in Nigeria, South African brands still have early-mover advantage as the international chains explore low-hanging fruit in other regions. The trick is to have the patience and deep pockets to make that work for them.

This article was first published in Business Day, and republished by How we made it in Africa with permission from the author.

Dianna Games is the CEO of Africa @ Work, a South African-based company that aims to facilitate and improve business in Africa through the provision of research, information and networking opportunities. She is also a columnist for Business Day.

Babatunde Akinsola
Babatunde Akinsola
Babatunde Akinsola is aNaija247news' Southwest editor. He's based in Lagos and writes on the Yoruba Nation political issues, news and investigative reports

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