The Future of Modern Trade in Ghana
Updated: Jun 2, 2020
Modern trade (Supermarket Chain ) business is a young industry in Ghana as compared to other countries in the world. Ghanaians are more familiar with the traditional (local) market where market women display their wares on a table and you have to go round the market to shop for your grocery and other foodstuffs. We have markets such as Agbogbloshie, Makola, Mallam Atta, Mamprobi, Nima, Mamobi, Tema, Ashaiman, Kaneshie, etc all in the Greater Accra Region and you can find similar markets in every region and district in Ghana. You mostly find our local foodstuffs and most grocery items in those markets. Those markets are similar to the African market in Brixton –London.
South Africa is a leader in retail business in Africa with a total retail sales of about R2.5 Trillion. In South Africa you have giants like Shoprite, Pick n Pay, Massmart, and Spar dominating the retail business.
I am on this journey as a trained professional with a deep understanding and familiarity of the retail industry specifically Modern Trade business, dealing with 1000's of products and brands across the supply and distribution chain.
Due to modernization, development, the ever-increasing presence of foreigners from the West, a growing young and urban population, a growing middle class, few supermarkets started operating in Ghana. You have the likes of Koala, Maxmart, Shoprite, Game, etc. The formal retail market (modern trade) is underdeveloped. The retail business is mainly dominated in Ghana by what I call the informal retailers (Provision Stores) who hardly pay tax, they do not keep proper records. They do the usual buy and sell. Unlike the banks, you do not understand why supermarket chains are not opening more branches in Ghana. You see banks having branches across the country but the supermarkets are stuck with a few branches.
The major players in the Modern trade business today are Shoprite, Game Discount Store, Koala Supermarket, Maxmart, Shop n Save, Yoomart, Melcom, Sneda, Citydia, Marina Supermarket, Batsonaa Total Supermarket which is a busy filling station which has now been transformed into a proper modern trade business where you can find almost everything. Batsonaa Total Supermarket is very exceptional with a huge footfall. You go there in the evening and the car park is full and the store very busy.
We heard about Carrefour (a big French retailer) and Pick n Pay, the second-largest supermarket chain in South Africa were coming to Ghana and it will be interesting when they enter the Ghanaian market. We do not know exactly when.
These major players all have few branches apart from Citydia with about 17 branches. All the above-mentioned supermarket chains are concentrated in Accra except for Shoprite and Melcom. Melcom can be found in almost all regions in Ghana.
Cote d’Ivoire, our neighbour with a population of 25 million has a lot of Supermarkets chains across the country, such as Carrefour, hyper Hayat, Cash center, Citydia, Cash Ivoire, Bon Prix, Sococe. Prosuma has a very active presence in Cote d’Ivoire with 20 trademarks. Prosuma alone has about 153 shops with a turnover of approximately 500 million Euros.
Ghana has about 30 million population and yet we see only a few supermarkets. The few we have are owned by foreigners which cut across most sectors of our economy even if there are laws to regulate this, foreign dominance is very common.
WHY? Let me tell you.
1. Lack of proper understanding of the business model.
2. Lack of trained professionals to man the business.
3. Lack of finance
Generally, any new business that comes up, you see a lot of Ghanaians going into it. For instance, you have a lot of locals going into the banking business, telecommunications, and even petty trading of all kinds. Ghanaians like buying and selling. ‘Provision stores’ or mini-marts are springing up everywhere in Ghana but how to modernize this business is a challenge. You have a lot of locals going into mini-marts, provision stores, restaurants, hotels, etc. Modern trade requires a lot more effort.
I was in a meeting recently, and a finance person asked a question. “What is difficult about managing a retail store, I think it is easy?'. I vehemently disagreed with him because of my background and experience in Sales and distribution I mean the whole value chain is my interest (Modern trade business). It is not easy but it can be done when you do the right thing every day.
You need to know how to start this business from building or renting a proper retail space to merchandising and opening the door for customers. You need professionals to handle this to make it work for you.
You also need to have full knowledge of how the business runs. You need a lot of funds because it is a capital intensive business. You need well-trained professionals to man this business because modern trade is a serious business and you cannot put just anybody to manage it, you will go down within a short period.
The provision stores we see around are managed by owners or relatives. They always put a reliable person in charge to avoid the risk of theft and fraud.
In advanced countries like the UK, Tesco, Sainsbury’s, Asda, Co-op, Lidl, Netto, Morrisons, Walmart, Auchan. Leclerc, etc have well-trained Managers who are professionals and in most cases, they are educated in their training Schools. For instance, before you become a manager in a Tesco Supermarket, you must go through at least a one-year Management Trainee program. Where you will be taught the following: Administration, Human Resource, Customer service Experience, Merchandising, Budget and Financial Management, Cash Management, Supply Chain, Inventory and Stock Management, Loss prevention, Distribution, Sales and Marketing, Health and safety and many more.
With my personal experience both at home and abroad, once you come out of such training you will become a successful retail business Manager and you should be able to manage any business anywhere in the world.
Any local who wants to go into this type of business must focus on training first. This is crucial.
You need a lot of funds to run a proper supermarket. You need to have a good space and a well-organized environment for parking, a good team, you also need a good warehouse, back office, and good systems as in software.
Your operations must be computerized. This will help you run the business effectively.
James who is a supplier of a fast-moving product recently told me that he has been supplying a small shop popularly known as provision store in Tema in and his product sells very well but anytime the product is sold out the owner will never call him to order for more until he goes there himself. Imagine how much sales the retailer is losing daily. The deployment of good software could have solved this but provision stores will hardly invest in software, only a few of them do.
With a good ordering system which you will find with modern retailers, such a thing will not occur or hardly will it occur if the system is very efficient. The system improves the availability of your products thereby helping you to identify the fast selling ones and you will focus on them.
Your ordering, inventory, cash, human resource, etc should be done electronically to avoid fraud and theft. In Modern trade business the number one suspect is the employee and it is common everywhere in the world if you do not protect the business with security, controls and so on to prevent theft, hence leakage.
According to a retail survey, 30% of theft comes from employees. A big inventory shrinkage without looking at even Shoplifting and Administrative errors, etc.
Here, there should be effective communication between your shelves, tills (checkouts), and your back office. Any item sold to a customer must be shown immediately in your system and you need good software to do that. If you do not do that, forget it. Leakage is a serious challenge in retail business and to control it you must have a lot of procedures and controls in place.
Modern trade is far from running a mini-mart. Once again it is a serious business hence you need to employ serious people who are well trained and trustworthy.
A friend recently went to a supermarket (modern trade model) to purchase a product. When he got home he realized that the product was out of date. He quickly brought it back with the receipt and the cashier who served him called a supervisor. The supervisor came to the checkout and this is what he said: “change it for him.” Wow.
No customer service at all.
My friend went away unhappy and will never return to that shop. This will affect their turnover and they will not understand.
He could have also gone to report to the Food and Drug Board /Ghana Standard Authority who would take the company on by sanctioning them for selling expired products.
This is why you need well-trained professionals to avoid such embarrassment.
Customers are now sophisticated and are looking for an experience not only customer service and if you cannot offer simple customer service do not go into Modern trade. Customers do not expect problems when they visit your establishment but when it happens they expect quick solutions.
I visit my competitors in this industry a lot and I hardly feel customer service. You reach the checkout, the cashier will not say anything to you; he or she will only scan the items and take the payment. Who does that in this age? You say hello to every customer with a broad smile and mention the total purchase to the customer in front of you and then, Thank you, after receiving the payment. This is basic customer service. I know for a fact that every established modern trade business will give basic customer service training to their staff especially those in the front line. Cashiers, Merchandisers, Supervisors, Duty Managers, and what have you. In my previous roles, my employers trained all of us including cleaners.
I monitor my team when it comes to customer service and for me, it is ZERO TOLERANCE for poor customer service and I received a lot of commendations for that. In terms of customer service during one of my covet visits, Citydia has been very consistent. Their staff is doing well and it cuts across all their shops and I would like to commend both management and staff for their efforts.
I recently bought a bottle of water from a hawker in traffic in Accra and right after the purchase, the lady said “Thank you. “ I was impressed.
CUSTOMER SERVICE is equal to Last
Is there any room for new entrants in Ghana?
Yes, the rising middle class means that convenience has become very crucial for modern consumers with largely different tastes, lifestyles, and choices.
This will translate into demand for different products - A KPMG report claimed.
There is a need to move away from the traditional market, open market, provision stores model.
A friend who lives in Community 25, Tema, told me “I used to buy my grocery items at a filling station mart until I found Citydia close by on the same stretch and they are cheaper.’ This is a customer who visits the store almost every day. He told me he could buy even beer without carrying bottles or crates so anytime he has a party he can quickly rush to the store and make his purchase, unlike the traditional stores where you have to carry bottles /crates.
You do not need a big space like Shoprite, just a small space well merchandised with fast-moving consumer goods (FMCG ), fresh produce, meat, fish, bread, wines, and spirits. In terms of fresh food, consumers feel safer and they trust buying fresh food from supermarkets than the local market due to the fact that processing and handling are done professionally by trained staff. The use of personal protective equipment (PPE), gloves, hairnet, and many more is mandatory. They have robust and trusted safety protocols especially with the challenge of COVID-19, consumers are more interested in their safety.
Food handling in our local markets is not the best hence consumers often buy contaminated food which may affect their health.
Retail sales in Ghana have been very encouraging but too small; Ghana can do better.
Modern Trade can do a lot. Currently, the average basket is about 30- 40 cedis.
Retail sales in 2016 were about 400 million cedis and for me, it is inadequate there is a huge potential out there and it will depend on plans and strategies.
In 2016, I was personally involved in the opening of a new store around East Legon and the feedback I got from customers was ” Thank you for coming to the community; you saved us all the troubles of going to Accra Mall and A & C Mall which is even more expensive.’
This is from customers. It means setting up supermarkets in various communities where the consumer can buy his grocery and other items is a very laudable idea and need to be encouraged in Ghana. Government and financial institutions need to support businesses that would like to go into modern trade.
Modern trade will do better with a Convenience Store Model in Ghana.
Convenience stores that will carry the right product range and category are what consumers need.
Product range and category is very crucial here. You do not need to stock every product. Let your Inventory system guide you. Go with sales-based ordering.
The convenience model should focus on fresh food and bakery in addition to groceries.
A very neat and well-merchandised store is what customers look for. Not the kind of store where items are displayed on the floor.
You go to filling station mart and you see this practice where they display some of the bulky items on the floor. In modern trade there are standards. Stock fast-moving lines and fresh food. No need for non-food items even if you will add some non-food it should be only a few lines.
In the UK, you see the likes of Tesco, Sainsbury’s, Co-op, etc even though with Superstores and Supermarkets they have convenience stores in various communities. At times convenience stores make more money than the supermarkets depending on their location.
This will create more jobs. Shoprite in Ghana employs over 600 people. Imagine we have more supermarket chains opening more branches all over the country the same way banks, microfinance, and others are springing up. There will be more jobs for young people and the government will generate more revenue because Ghana Revenue Authority (GRA) can easily trace these businesses because they are well established and legally registered (modern trade –retail), unlike the provision stores.
How does the future look like for modern trade in Ghana ?
The future of modern trade business for that matter supermarkets is very bright.
There are key emerging trends in retail business across the world and the same thing should be intensified in Ghana. Trends such as E-commerce (Online Shopping) where you sit at the comfort of your home or office and place an order for your grocery items and it will be delivered to you, some retailers even offer free deliveries. This is the way to go.
Amazon is taking steps into grocery deliveries. Modern trade should be geared towards convenience and digitalization to make life easier for customers. Africans for that matter, Ghanaians, continue to patronize goods from traditional shops and informal stalls but urban dwellers are increasingly spending their money in malls as well due to change in lifestyles.
Shopping malls are now all over in Africa especially in Major cities such as Lagos, Abuja, Nairobi, Abidjan, Accra, Cotonou, Ouagadougou, Kigali, Yaounde, and others. They all attract big brands. In modern trade, we are expecting more brands such as E.Leclerc, Carrefour, Auchan, Lidl, Netto Intermarche, Tesco, Sainsbury’s, Asda, Aldi, etc to change the narrative in Ghana as we can see in the banking, fashion industry where we have Jet, Mr Price, Bata, Woolworths, TM Lewin, Levis, Swatch, Mango, Decathlon, etc all in Ghana today.
According to a United Nations recent report, demographic and urbanization growth could quadruple between now and the year 2040 in Ghana and Africa as a whole.
Retail food business always experiences a significant like for like sales growth in general.
During the 2008 credit crunch in Europe and America, the retail food sector recorded a significant growth as compared to sectors like fashion, real estate, automobile, etc.
A colleague once said “We eat every day therefore you cannot go wrong with the food business.
The good news for us in Ghana is that we can successfully procure every product in Ghana to fill our stores; no need to import anything. All the major distributors are available and ready to supply you what you need and they are very supportive. Unilever, Nestle, Guinness Ghana, Accra Brewery, Kasapreko, Transmed, Poultrade, Gandour, L’Oreal, SC Johnson, Peace- Indo, Bel Aqua, Voltic, Cave & Garden, Don Emilio, Forewin Ghana, Eden Tree, Agripak, Farmers Market. Distell, the list is very tall hundreds of them. You get the shop and they will come and fill it for you. These distributors are very crucial in the chain and they are very supportive in terms of creating visibility for their products. What I am trying to say is that you can do a modern trade business here in Ghana without importing a single product.
The buying decision is very important. All these suppliers will come but you do not have to purchase all the products they present to you. Negotiate and you are good to go. Use a process to get it right
1. Supplier Search and selection
In the UK, the likes of Tesco have self- service pay point where you can do your shopping in the supermarket, scan the items yourself and make the payment yourself with no interaction with any shop attendant. This is the way to go. Shoppers will embrace this in Ghana. Melcom, Shop n Save, and a few others have started online shopping and it is a good move.
The use of technology to do business is very crucial for modern trade in Ghana. Modern trade needs to use both physical and digital space for retail business. This is the right way to go, the future of modern trade business is very bright and the use of technology is key as it is in other sectors like banking, insurance, telecommunication, etc.
This is where tech companies need to come up with more innovations and solutions to support the operations of retail business specifically modern trade. They should not concentrate on banking, insurance, Telecommunication only. There are more opportunities in modern trade business for them.
Ghanaian businesses can partner to build a resilient modern trade business as they have done in other sectors of the economy with the right infrastructure, collaboration, innovation, technology, and trust.
Ghana deserves a rich and buoyant modern trade that is very competitive to break the monopoly of the few existing ones where customers can go and have the experience they find elsewhere or in other sectors such as UK, France, Italy, Spain, USA or the banking, telecommunications, insurance and other sectors of the economy.
What we need in Ghana is more budget supermarkets such as ALDI and LIDL who are currently competing with Sainsbury’s, Tesco, Asda, Morrison, Co-op, etc. Shoprite and others can remain in the shopping malls for high –end market segment while the likes of Citydia comes close to the communities offering lower-cost grocery for the low- end market segment.
Francis is a leading business development expert in West Africa and Francophone Africa.
Schedule a one on one video consulting call with Francis here.
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