Young Africans drive spending

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Private consumption in Africa rose by $568 billion (R5 trillion) between 2000 and this year, higher than in India or Russia, and was expected to grow by a further $400bn by 2020. The consumers who will make this possible are brand conscious, preferring formal shops, and buying products based on price point and quality, according to the Rise of the African Consumer report from the McKinsey Africa Consumer Insight Centre.

The report, which was released yesterday, surveyed 13 000 individuals from 15 African cities, including Accra, Addis Ababa, Cairo, Cape Town, Durban, Johannesburg, Nairobi, Luanda and Abuja. Apparel, consumer goods and food were expected to account for 45 percent of the estimated $400bn.

“This is due in part to urban Africans spending a large share of their budget on food and groceries, more than consumers do, on average, in Brazil, China, India and Russia,” the study said.

The report revealed that Africa had the world’s youngest population with more than half of its inhabitants were under 20 years of age. Among the residents surveyed in urban centres, the study found that the 16 to 34 age group accounted for 53 percent of the income. This group was more educated and sought products that would reflect the right image. “They are more brand conscious, follow the latest fashion and trends, and say they are typically one of the first people to try new things,” the study said.

About 55 percent of sub-Saharan Africans were loyal to a single grocery brand, while 70 percent were loyal to a small selection of brands. This revealed that brand-loyal shoppers represented the second-largest market segment

The research showed that there were distinct consumer segments, each with different attitudes and behaviours. In the grocery category it was found there were low price, quality, local, brand-loyal, experimental and fresh lover shoppers.

More than half of African households were projected to have discretionary income, rising from 85 million households to almost 130 million in 2020. For example, 97 percent of Ghanaians surveyed said their household would be better off in two years.

While urbanisation in African countries was on the increase, urban spending was increasing twice as fast as rural spending and was projected to account for a large share of future growth.

Although fragmented informal retailing remains the norm in most of Africa, the size of formal retail would dramatically increase in coming years. In apparel, for example, the market share of the six leading retailers in Egypt was just 4 percent and in Nigeria only 2 percent.

Despite the predominance of informal retail across the continent, urban consumers have modern and sophisticated tastes and are no different from consumers elsewhere.

Of the study’s respondents, 58 percent said they chose clothing based on fashion and 43 percent felt it was important to follow the latest trends. More than half owned internet-capable devices and visited websites at least once a month. More than 50 percent of urban Africans had accessed the internet in the last four weeks. Overall, 22 percent of urban Africans spent more than 10 hours a week online.

Most decisions concerning buying, were made at the point of purchase, suggesting a large number of consumers preferred in-store advertising.

Companies in retail industry were reminded that “one size does not fit all”.

“[Companies] should understand the size of the segments, tailor value propositions to the target market, and clearly articulate the benefits of the brand.” Companies should also build awareness through traditional and non-traditional channels and educate the consumer. Companies should also effectively manage the distribution network, the report says.


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