Informal retail channels are tied to the history, traditions, and trading preferences of consumers in the region. These deep-rooted practices and structures are part of the fabric of society, so understanding how these channels operate and where products are consumed is essential for Swedish retail and technology companies who have solutions and products that are in demand.
Traditional meets the future
The informal retail sector in Africa is sustained by a combination of factors, including convenience, affordability, and accessibility. Most African consumers live in low-income areas and informal retail provides a vital source of goods and services that are not readily available through formal channels. The sector is characterised by small-scale, independent traders who operate without formal registration or licensing.
While the sector has, and continues to dominate the retail landscape, one of the main challenges facing the informal retail sector in Africa is the lack of infrastructure and access to financing which limits retailers’ ability to store products and grow their business. Understanding the product flow and demand is part of the puzzle that Swedish companies need to unlock so they can develop an effective regional route-to-market strategy and targeted product offerings.
Despite the challenges, the informal retail channels play a significant role in the continent’s economy. And now, digital technologies are revolutionising the retail landscape in Africa; investments in innovative digital business models have enabled businesses and consumers to access new retail and payment opportunities.
Adapt to thrive
Local businesses must adapt their product portfolios, pricing, and distribution strategies to capitalise on these new channels of opportunity or devise innovative
alternatives, and this is where Swedish companies can play a pivotal role; and now is the time to leverage digital technologies when considering market entry into Africa.
Swedish companies who can help informal retailers with digital technologies can unlock revenue growth opportunities by enabling retailers to expand their customer base, streamline their operations, and access new markets. For example, digital technologies can enable SMEs to access financing, connect with new customers, and improve their supply chain efficiency.
A new retail hotspot
Digitalisation can help deliver affordability through innovative payment solutions while also enabling retailers to reach a wider consumer base, including secluded and rural populations. Thinking outside of the box while setting a go-to market strategy is critical for reaching and promoting new products to African consumers.
Africa, and individual markets on the continent have often been overlooked as viable for global expansion by Swedish companies, primarily because of the unknown. However, if companies first understand the factors that influence how these retailers operate, including economics, consumer preferences, and local culture, the short- and long-term growth potential is unlimited. There is also the opportunity to set standards for sustainable business practice and influence the direction of consumer trends.
If navigated correctly, the informal retail sector in Africa presents numerous opportunities for Swedish companies. For example, Swedish companies can leverage their expertise in logistics, supply chain management, and digital technologies to support the development of the informal retail sector. Collaboration is not off the table – working closely with local partners on the ground helps develop new products and services tailored to the needs of local consumers and could be key to breaking into the vast market.
Business Sweden has conducted market analysis investigating the informal retail sector and the move from informal to modern retail settings which has been heavily influenced by the growth of digitalisation through mobile payments. The findings of this analysis are presented alongside deep dives on some of the largest economies on the continent, Kenya, Nigeria, and South Africa, in a Report format.
Contact us today to discuss how to access and grow in the vibrant and diverse retail environments in Africa