These are misleading because they do not reflect how wealth trickles down through the economy. Companies’ estimates of the consumer opportunity in Africa tend to be based on GDP and demographic growth data. Regarding the first mistake companies make, our analysis uncovers two adjustments they need to make:ĭo not rely only on headline economic indicators. Despite some markets slowing because of the commodity price downturn (for example, Nigeria), we nevertheless forecast total annual consumer spending in the region to reach US$ 2.5 trillion by 2025. Realizing the opportunity in Africa demands that businesses rethink their strategies. Companies are not considering how the consumer class (which we define as those living on US$ 3.90 and above per day, the point at which people can spend beyond mere survival) is changing across the region.Companies underestimate the extent to which local factors determine how, where, and why consumers make purchasing decisions.Companies set unrealistic targets due to misunderstanding the drivers of consumer spending power. ![]() Our research shows that MNCs are making three mistakes in Africa: Yet neither of these approaches addresses the real problems at play. Others also mentioned disappointing results, in some cases prompting them to deprioritize Africa in their global strategies, while others are keeping their heads down in the hope that business conditions will change and make it easier to hit their targets. In a survey of 20 senior executives working in Africa whom we work with, six said they struggled to hit revenue targets last year. While the region is home to some of the fastest-growing economies in the world, and while consumer spending power in Africa has risen (from US$ 470 billion in 2000 to over $1.1 trillion in 2016), some MNCs are finding that their business in the region is underperforming. (Note: When we use “Africa” in this article, we’re referring to the 49 countries south of the Saharan Desert, not the five countries to the north of it, which have different cultural and economic dynamics.) The problem points to a larger conundrum facing multinational corporations (MNCs) that had hoped to tap Africa’s one-billion-strong population and its much-vaunted “ middle class“: Sales and profits in these markets have not lived up to businesses’ expectations. Nairobi’s New Two Rivers Mall Is the Largest in Eastern Africa ![]() Why? Locals will tell you the mall is inconvenient to get to, and despite poverty levels in the region falling amid strong economic growth and foreign investment, the products sold there are too expensive for Nairobi residents to afford. But visit Two Rivers on a weekday, and the vast complex is empty. Completed in February 2017, it is eastern Africa’s largest shopping venue, housing grocery chains, restaurants, and luxury boutiques. Take the new Two Rivers Mall in Kenya’s capital, Nairobi. Now, branded items - from luxury cosmetics to fast food and fast fashion - are becoming widely available at the glittering new shopping malls scattered around the region’s fast-growing cities. A few years ago, many staple Western goods were hard to come by in some markets. The retail scene in Africa has undergone a rapid transformation.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |