It is estimated that in Africa, more than 70% of food, drink and personal care products are sold through informal channels such as open-air markets, kiosks and table vendors. However, despite their importance, informal traders have been held back by a host of challenges, including frequent stock-outs, limited access to capital, and difficulties in receiving goods from suppliers. In this article, Tridiv Vasavadachief technology officer at Wasoko — a company that connects informal retailers to consumer goods manufacturers through digital channels — explores three trends shaping the industry.
1. Smartphones: a new normal for informal retailers
Over the past decade, the informal retail sector supply chain in Africa has undergone a process of gradual innovation, with retailers becoming increasingly accustomed to new methods of ordering products through SMS and commercial agents. However, 2022 marked a turning point in customer readiness for technology solutions, with smartphone and app adoption reaching unprecedented levels, particularly in Kenya, Côte d’Ivoire and Tanzania, where adoption rates smartphones are expected to reach 68%, 67%, and 61%, respectively.
This trend, which has been mainly concentrated in first-tier cities, is expected to accelerate in smaller cities and potentially in rural areas. A potential barrier could be device affordability, but given the significant economic benefits of mass smartphone adoption, governments, NGOs and telecom operators are increasingly interested in providing access. subsidized. Over the coming year, this will play a crucial role in driving a new level of convenience and efficiency in Africa’s $850 billion informal retail space.
2. An emerging class of market leaders
Traditionally, informal retailers in Africa have offered a limited range of essentials in small quantities to accommodate the size of their stores, which can range from as little as 1m2 at 30m2. However, with the increasing availability of credit from fintech platforms, we can expect to see more retailers growing their businesses, which will result in an emerging class of market leaders, similar to what we have seen in markets. more mature like India and Vietnam.
Importantly, these expansions will also need to be driven by increased consumer demand. This transition is likely to be more gradual, due to factors such as rising food prices and difficult economic conditions across the continent. Therefore, it may take a few years for the market to fully evolve in this area, but a growing group of informal retailers are still expected to make significant progress in building more competitive businesses.
3. The evolution of logistics networks
Currently, millions of retailers are constrained by a highly fragmented logistics industry characterized by unreliable deliveries and unpredictable prices, which can often be relationship dependent. However, as informal retailers expand their businesses, they will naturally need faster and more efficient supply chain networks to meet their demands, opening the door to more standardized and efficient service providers to meet their demands. needs.
With this in mind, it is expected that digital platforms – which have been at the forefront of innovation in the logistics sector in recent years – and wholesalers will strive to fill this market gap. In 2022, wholesalers began to expand increasingly into areas such as berthing (handling goods in port) and last mile delivery, providing their customers with a more holistic service offering. As the informal retail sector in Africa experiences greater consolidation, it is expected that there will be even more competition among these various players in the logistics industry, which will ultimately benefit account to local merchants.