Thursday, 7 November 2013

As Woolworths Plans Its Exit From The Nigerian Market

The announcement that South African retailer Woolworths is set to pull out of Nigeria due to high rental costs and supply chain challenges caught retail analysts unawares.
This is against the backdrop of rising trend of retail mall constructions in Nigeria, the type of locations preferred by Woolworths and other such retail businesses including Shoprite, Game etc.

Following the success of The Palms Shopping Mall in Lekki- Lagos, other malls have since sprung up in other locations in Lagos namely Ikeja Shopping Mall, E-Centre Yaba, Galleria Victoria Island and also in other towns such as Abuja, Enugu, Ibadan and Benin.

In a statement, Woolworths which already has three retail outlets in Nigeria said “The Nigerian business was unable to sustain a compelling product and value proposition which represents the brand well, and meets the needs of the Nigerian customer”.

While this may seem like good news for the fledgling indigenous fashion industry in Nigeria, it does not however paint a good picture for the county. Officials of the Federal Ministry of Trade & Commerce and other government agencies have been touring the world in search of foreign direct investments (FDIs). It does then appear that the competitive environment in Nigeria is still not very suitable. If Woolworths closes shop, they would take with them their fashion retail operations experience which would have impacted on the local retail industry in Nigeria. There will also be job losses and decrease in nation brand equity. Such negative business news will erode whatever little gains that may have been made by the recently launched ‘Fascinating Nigeria’ repositioning campaign. This is because no nation can claim to be a favourite destination for trade and investments if foreign businesses in such a country are closing shop as a result of unfavourable competitive business environment.

Government should look into some of the concerns raised by Woolworths and other businesses operating in Nigeria. For example, what is the reason for the high rental costs? Could this be as a result of high interest loans secured by the mall developers and the need to recoup back within the shortest possible time as the political and economic terrain continues to appear unpredictable?  

Government should also do something about supply chain challenges. Woolworths imports the bulk of the goods it sells from abroad. Reports in the past have shown the difficulties faced by importers in clearing their goods out of Nigerian airports and seaports. The challenges include both administrative bureaucracy and multiple taxation. There is also the nightmare of transporting the goods out of the ports in Apapa and the traffic gridlock caused by bad roads.
Addressing these challenges will help to enhance the competitive business environment in Nigeria and make the market more attractive for both local businesses and foreign investors.

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