3 Reasons Why Africans Don’t Spend at Malls: a Lesson for Winning Consumers
If there are just a handful of places on earth, where malls are set for growth, then Africa is among them. The decline of the American mall has been abundantly covered and video-serialized, the European retail landscape is said to be saturated, and Asian malls look insatiable — more space, more tech, more features — but now struggle to draw masses.
In Africa, the construction of malls has accelerated over the last decade on the back of major socio-economic trends: the growth of the population, the urbanization, the rise of the middle class, and the irresistible desire for modernity.
But in 2017, leading and new malls scratch their head with a painful question: where are the shoppers?
From continental leaders such as Morocco Mall; to new players like Two Rivers in Kenya, to established names such as Rosebank Mall in South Africa; malls are seeing decreasing traffic and dwindling shopper spending.
In fact, a finding of my field research is that the things consumers complain the most about are three fundamentals brands and companies should get right on their way to win African consumers.
WHAT’S THE RIGHT PRICING
Walking in Le Premier, the 2016-opened, first-ever mall in Kinshasa DR Congo, is an awkward experience. The only people populating the hallways are the sales associates and the security teams and the only stores that are relatively busy are the two cafés. Several large storefronts are vacant. Every time I walked into a store, the managers perceived me as a strange buzz disrupting their usual quietness.
The reality is that the goods sold here are beyond reach for the average Congolese wallet. “I went there with the kids a couple of times for ice cream. That’s it.” says Jean Pierre Wenzi. With a spouse who worked as a financial executive at a TV company, two kids at a French private school, and his own mid-level job at a bank, Mr Wenzi belongs to the upper-middle class. Yet, he doesn’t see himself shopping at the mall.
According to the African Development Bank, more than 80 percent of Africans earn less than $4 a day: these are all consumers who do not go anywhere near malls, supermarkets or fancy boutiques. Instead, they are convinced their budget is better taken care of by a variety of destinations, from kiosks, side-road table-tops, street vendors to corner stores and traditional open-air markets.
WHO ARE THE TARGET CUSTOMERS
In retail, an anchor tenant is the larger store — usually a big-name department store — upon which malls rely to attract crowds. From construction to inception, Casablanca-based Morocco Mall had in Galeries Lafayette, the Paris France headquartered global luxury department store franchise, a powerful anchor, spanning three levels at its inner core. Also, because it hosted Galeries Lafayette’s first-ever and only presence in Africa, Morocco Mall became a must-visit for riches from all over North Africa and West Africa.
But Virginie Valentini, an executive at a sport car dealer and a socialite in Casablanca, grew frustrated when Galeries Lafayette repeatedly proved unable to deliver: “I wanted a Zadig & Voltaire handbag displayed on the window. They told me it had been reserved for a customer. Then another day, the shoes that they had put on sale in the morning, were no longer available end afternoon!” She says it became clear that the department store was serving outdated fashion collections, had no stocks, and was never able to offer pieces on sale on Galeries Lafayette’s global website.
Consequently, well-off consumers — the very group that Morocco Mall was primarily targeting — deserted the outlet. In 2012 the average shopper spending at Galeries Lafayette Morocco was about 70 EUR, compared to more than 100 EUR spent by a French shopper and up to 900 EUR spent by an international shopper at Galeries Lafayette Paris. Galeries Lafayette Morocco closed in March 2016, after only four years of activity.
WHAT’S THE EXPERIENCE CUSTOMERS EXPECT
At Morocco Mall’s luxury section, between the Louis Vuitton store and the Gucci store, reigns a grand piano in a unique decor that, with a majestic chandelier, dazzling window displays, and a flamboyant carpet, lends a sense of exclusivity. The place is a hit with visitors. They flock here to take selfies and group photos, rave about the glitz and glamour, and look forward to sharing the pictures on social media and pretending they were in Paris or New York. These are exhilarating scenes you won’t see in Nairobi Kenya.
In Nairobi, home to the largest mall population in Africa, visitors find draconian security measures — body searches, metal detectors, close surveillance; all enforced by a plethora of overzealous security personnel. Want to capture the moment whilst visiting for the first time or relaxing with family and friends? Don’t try. Taking photos is strictly prohibited inside and around the building. As a result, the customer experience is marred with discomfort and frustration.
Kenyan malls also fail to deliver what modern consumers expect: choice.
In a recent issue of Couture Magazine, a local glossy lifestyle magazine, the mid- and top management staffs of RMA Motors, a major distributor of Jaguar and Land Rover, were asked about where they shop for fashion. Most had this same answer: Nakumatt.
As Kenya’s largest supermarket chain, Nakumatt has based its rapid expansion on anchoring malls. This is a pattern with local retailers where they want to be tenants at every mall in a bid to secure an extensive footprint in the market. Consequently, consumers find, outlet after outlet, the same brands, the same products, and the same service.
So far, there are no flagship stores of international luxury and mass consumer brands. No Kenyan mall qualifies for the AAA rating according to Sagaci, a Nairobi-based research firm.
THE QUESTIONS TO ASK FIRST
To be sure, the current wave of mall development is set to continue. Within the 47 African countries it covered in a 2016 study, the real estate company Knight Frank estimates that there is currently about 3 million sqm of existing shopping centre space, not including 23 million sqm in South Africa alone. “There would appear to be room for considerable further retail development across the [sub-Saharan] region” says Knight Frank.
But Kenya alone will have 72 malls in a few years: does the consumer need a huge shiny mall at every corner? Already several industry experts are questioning the viability of the African mall, notably in the face of recent developments that sent shockwaves across the board.
Indeed, from Nakumatt’s serious financial troubles and Galeries Lafayette’s abrupt Africa exit, to the significant delays in the construction of large-scale malls in Angola and Uganda, and the chronic under-performances of several South African outlets; all these issues have been attributed to the mall rush gripping the continent. Combined with structural issues affecting families’ budget, such as the collapse of the commodities boom, they led foreign investors and international consumer brands to push the ‘wait-and-see’ button when it comes to doing business in Africa.
Companies and entrepreneurs willing to be a part in the African consumer story would need to do a cold, contextual reading of the macros — the youthfulness of the population, the urbanization, the growth of the middle-class — and get a set of fundamentals right:
· How real is the consumer need for the product?
· What’s the size of the addressable consumer market?
· What’s the purchasing power of the target customer?
· What’s the right pricing for capturing a critical mass of customers?
Morocco Mall replaced Galeries Lafayette by a mass-market department store offering low- and mid-range products and re-calibrated their positioning. Doing so, they recognized that all along their “natural” audience had been those who want value for money in a modern shopping environment. That’s the middle class broadly defined (85 percent of Morocco’s population). That’s also what the story of the African consumer is about.
For the next chapters of that exciting story, it will be interesting to see whether developers, retailers and brands will continue with the build-first-ask-questions-later approach, where they generate oversupply and the end game is snatching customers from competitors; or whether they will take a ticket to a destination called sustainability, moving to the beat of the consumer’s voice.
Patrick Gaincko does research and writes about African consumers. He constantly travels across Africa and regularly speaks at global conferences. His website GainXperience is regarded as an essential resource by brands, companies and entrepreneurs willing to win in Africa.