The African retail sector has emerged as a lucrative investment opportunity, attracting foreign companies seeking growth in a market driven by an expanding middle class, increased disposable income, technological advancements, and the commencement of the African Continental Free Trade Area (AfCFTA).

Euromonitor International reported that in 2018, retail sales in the region surpassed US$500 billion, and with the AfCFTA’s combined market of over 1.2 billion people and a GDP of US$2.5 trillion, this figure is expected to skyrocket.

While multinational retail giants are flocking to Africa, traditional and informal retailing still dominate the market, despite the growing presence of modern retail chains. According to a recent report by the Boston Consulting Group (BCG), African consumers continue to purchase more than 70% of their food, beverages, and personal care products from over 2.5 million small, independent shops across the continent.

“Traditional retailers play a vital role in meeting the needs of our communities,” said Dr. Aisha Abdallah, an expert in African retail. “Their proximity, flexibility, and convenient operating hours cater to the demands of consumers. Additionally, many of these shops offer credit facilities, allowing customers with limited incomes to make purchases in small quantities.”

In Nigeria, traditional retailers account for a staggering 97% of national sales, with over 600,000 small retailers driving the market. Morocco, Kenya, and Egypt also see traditional retailers commanding a significant portion of retail sales, with figures of 82%, 77%, and 75% respectively.

The resilience of traditional retailers can be attributed to their ability to meet the needs of local communities. However, they face challenges from modern retail expansion, the rise of e-commerce, and evolving consumer behavior catalyzed by the COVID-19 pandemic.

To remain relevant in an increasingly digital world, a growing number of traditional shops are adopting digital retail services. The adoption of remote ordering and delivery services has gained traction, with Kenya experiencing a rise from 27% to 39% of retailers offering these options between early 2019 and late 2021, according to BCG. Egypt has also witnessed similar trends, with approximately one-third of traditional retailers providing remote ordering, delivery, and bill payment services. Nigeria has followed suit, embracing remote ordering as a popular trend.

Recognizing the inevitability of digital transformation, startups have emerged to provide innovative solutions to traditional retailers. These startups aim to resolve bottlenecks and accelerate the digital transformation of traditional shops. One key focus area for these startups is addressing the inefficient distribution systems that hinder traditional shops from obtaining sufficient inventory.

A prime example is the Nigerian B2B digital marketplace Alerzo, which enables over 100,000 users to purchase inventory directly from manufacturers, facilitating cashless payments and better revenue tracking.

Another successful strategy involves small trader shops acting as agents for larger e-commerce startups. This model has gained popularity in Kenya, where pioneering startup Copia Global leverages the trust consumers have in their local shopkeepers. Copia encourages consumers to buy products through their e-commerce site, with products delivered to the agent within 48 hours for customers to collect. This approach allows even less tech-savvy consumers to access a wide range of products online, while small shop owners can participate in the growing e-commerce network and earn income through commissions.

Despite the expansion of modern retail brands and the rise of e-commerce, traditional retailers in Africa demonstrate their resilience by adapting to digital transformation. By embracing innovative solutions and leveraging their existing strengths, these retailers are poised to maintain their prominence in the ever-evolving retail landscape of Africa.