According to a 2010 McKinsey & Co. report, Lagos is among five other African cities where consumer spending is expected to increase to more than $25 billion yearly by 2020. The Nigerian operator of Spanish supermarket chain, Distribuidora Internacional de Alimentacion SA (DIA) plans to take advantage of this projection by opening more than 100 stores in the Nigeria by 2020.
The Chief Operating Officer, Samuel Abiola-Jacobs in an interview with Bloomberg in Lagos noted a Nigerian Company, First Maters retailers (FMR) bought the local right to operate DIA stores and has opened its first CityDia store in Lagos.
DIA has branded shops in Asia and Latin American countries, including China, Brazil, two francophone African countries -Senegal, and Cote d’Ivoire. DIA’s expansion into Nigeria marks its first entry into an English-speaking country, and also its third market in Africa.
Taking into cognizance how international retailers like WoolWorth Holdings Limited have struggled in Nigeria due to high property cost and difficulties in the transportation of products to stores, DIA is optimistic of competing with Shoprite Holdings, South Africa’s biggest retail and fast food company still operating in the country.
But can DIA compete with Shoprite in Nigeria?
Though Shoprite is currently Africa’s biggest grocery store, the Spanish International hard- discount supermarket (DIA) as at 2013 operated 6,914 stores, 46 distribution warehouses and approximately 47,500 employees worldwide making it Europe’s third largest food sector franchiser.
Shoprite, with operation in about a dozen African countries, has also tailored its model to appeal to different tastes and income levels in the countries it operates in, which DIA would have to contend with.
Lack of sizeable space has always been a problem for new coming retailers into Nigeria and DIA will most likely face same problem like Wal-Mart experienced some years back. Shoprite has been able to partner with developers to build warehouses and shopping centres to foster its roll out phase, DIA would find it hard to contend with that. As noted by, Kamal Mansour, franchise owner of stores including Hugo Boss and Mango, “The problem is the space, not the market,”
There have been healthy competition in the Nigerian retail market in past years. Competition is not strange for Shoprite. The mega store has been able to successfully wade off competition from other retail companies in past years. Shoprite, which began expansion in 1995, was premised on supplying what the local market needs, so it keeps its distribution costs low despite glamorous displays and shop fitting; an added advantage over DIA.
Shoprite currently operates in over twelve African countries compared to DIA which operates in just two African states, and Shoprite has successfully appealed to different taste of consumers in these African countries. In Nigeria, Shoprite has strong brand awareness which contributes to its continuous expansion.
Shoprite has since given its commitment to some developers to open stores in major cities across Nigeria such as Abuja, Calabar, Kano, Port Harcourt, Enugu, Ibadan, Kwara, Lagos, and Delta, and recently opened one of its outlets in Akure, Ondo state.
Comparing DIA’s expansion in Senegal viz-a-viz Nigeria might prove wrong. Nigeria has enough shopping malls with stiff competitions, unlike Senegal and Cote d’ Ivoire where DIA has its outlet. Space remains a particular bane for DIA’s expansion since its target includes major cities in Nigeria.
Of great importance is the fact that Shoprite has local suppliers from Nigerian farmers which shows huge support for local production and has received tremendous support from the government. As noted by the Shoprite Chief Executive Officer, Whitey Basson, “The federal government of Nigeria has a clear policy of supporting legitimate foreign investors and as such, there are agencies like the Nigerian Investment Promotion Commission (NIPC) that provide the necessary assistance and advice in setting up one’s business here.
DIA as a major competitor with a consumer retailer firm like Shoprite whose success hinges on three broad trends – increased social security spending by the government, strong expansion into the rest of Africa, and taking market share from rivals, specifically their customers in the higher-income groups – remains an uphill task.