The COVID-19 pandemic has drastically changed the way businesses operate and communicate in a bid to adapt and retain customers. The retail sector, in particular, has become increasingly digital and internet-driven as majority of the brick-and-mortar stores have adapted digital ways of shopping without compromising on the in-personal experience.
According to a recent report from TradeDepot, the impact of the pandemic, rising inflation, border closures and other issues drove significant changes in behaviour for retailers, distributors and manufacturers in 2020. As the sector settles into the new year, TradeDepot predicts that some of the prominent trends that shaped 2020 – notably smaller packaging for consumer goods and increased spending on food and essential goods due to dwindling disposable income and people spending more time at home – will continue to influence behaviour across the market in 2021.
On that note, here are top key trends from 2020
- Across the retail sector, the pandemic led to an increase in store owners exploring alternative channels of reaching, acquiring and servicing customers – especially online and social media. Demand for TradeDepot’s services increased by 500%%, with a 300%% increase in transaction value and volume on the back of the pandemic.
- Consumer buying patterns shifted slightly towards more food items, with growth in purchase of food and essentials as opposed to other categories. TradeDepot’s data revealed a 10%% increase in the overall contribution of food items to the distribution volumes, compared with 2019.
- In the drinks category, the lockdown impacted manufacturers and distributors’ ability to sell into bars, restaurants, and clubs, which usually account for up to 60%% of their revenue. As a result, many shifted their attention to Mom and Pop, convenience stores etc. to cushion the impact.
- In the detergent category, price increases driven by inflation led many manufacturers to either introduce or expand production capacity for smaller packs (25g, 90g, 190g, etc.) to drive more volume in the consumer segment of the market, which accounts for 65%% of the market. The pandemic also saw the introduction of more hygiene-related products to help curtail the spread of the virus.
What do these trends mean for the Nigerian retail sector in 2021?
- According to TradeDepot, manufacturers will adapt to rising inflation and dwindling disposable income by extending the trend of smaller packs to other product categories.
- Manufacturers will explore more alternative route-to-market channels with capabilities to build retail networks and offer logistics-as-a-service to mitigate the risks that come with serving new customer bases.
- There will be an increase in the number of challenger value brands and new market entrants offering lower-priced products in key categories as consumers get increasingly price-conscious and more eager to experiment with new, lower-priced products.
- There will be a rise in products and services designed to help consolidate and improve the industry. More competition will also spring up in the value chain with more platforms designed to provide auxiliary services like goods packaging and processing.
- With the pandemic still ongoing, people will continue to take a cautious approach to mingle in crowds and will spend more time at home than in previous years; as a result, spending on food and essential goods is likely to increase.
Challenges and opportunities for 2021
- There are challenges with data aggregation because it is a relatively new discipline in this space. However, there’s also an opportunity for companies with the right capabilities to capture this and utilise it to cater to the audience. Structured access to short term inventory financing at minimal interest rates will also help stimulate growth.
- There are also challenges with infrastructure and logistics, making it difficult for store owners to meet the customers’ demands and grow their businesses.
- Access to working capital is still the biggest challenge most retailers face in trying to grow their business. There has been some progress with consumers’ financial services in recent years, and there is potential for many of the learnings to be adapted for retailers.
According to Onyekachi Izukanne, CEO and Co-Founder of TradeDepot, “the retail sector is one of the strongest pillars of the Nigerian economy, but the absence of data and verifiable insight often makes it difficult to assess the opportunities and challenges that abound in the space. The sector is also hampered by infrastructure and logistics issues that undermine the efforts of the industrious business owners. With some more support from the government, public institutions and private sector players, there is the potential to transform the Nigerian retail market and achieve a quick win for boosting the nation’s GDP”.
TradeDepot, founded in 2016, is an end-to-end distribution platform that aims to connect the world’s top consumer goods companies directly to retailers on the streets of Africa’s cities. With a network of over 50,000 micro retailers across Nigeria, TradeDepot aims to build the largest retail distribution network in Africa by using technology to improve the distribution of food, beverages and personal care products to retailers, and to improve livelihoods for these retail store owners.