New insights have been released that share some highlights on the trends that are expected to shape Nigeria’s retail sector in 2021. The insights come from market data by TradeDepot, 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.
One of the key insights and trends that shaped 2020 TradeDepot say they have observed from their data is the growth of smaller packaging for consumer goods (FMCG) and increased spending on food and essential goods. This, according to the company, is due to dwindling disposable income and people spending more time at home - will continue to influence behavior across the market.
“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 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," said Onyekachi Izukanne, CEO and Co-Founder of TradeDepot.
Smaller FMCG packaging and dwindling household income
The trend of smaller packaging as a result of dwindling household income during the COVID-19 is something that we previously reported on at iAfrikan.com. Particularly, this trend, as TradeDepot's market data from 2020 also confirms, is mostly related to FMCG goods.
What we have also observed as written in the article titled "Africa's sachet economy" is that this trend is not only limited to Nigeria but is prevalent across several countries across Africa.
The retail sector is the third-largest contributor to Nigeria’s Gross Domestic Product (GDP) and more than 90 percent of the sector is made up of informal retailers.
Key trends from Nigeria's retail sector in 2020
TradeDepot has built a network of more than 50,000 micro retailers, working with global distributors and manufacturers like Nestlé, Unilever, GB Foods, and Danone to make household supplies such as milk, soap, detergent, and other essentials more accessible and affordable.
Here are the top insights from TradeDepot’s market data 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 the ability of manufacturers and distributors 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.
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