Yinka Ibukun
PEPKOR, the local clothing retailer bought by Steinhoff International for $5.7 billion (R68bn) in 2014, plans to double its presence in Nigeria with 10 store openings a year through to 2018.
The company opened its first outlet in Africa’s most populous country in 2012 and would have 31 stores by July, Deon Conradie, Pepkor Nigeria’s general manager, said on April 27 in his office in Lagos.
The clothing and footwear chain planned to sustain that growth rate over the next three years, he said.
“‘Our prices are low and we cater for that middle-to-bottom market, which is the fastest growing,’’ Conradie said. ‘‘There’s a need for somebody to supply that market.’’
Nigerian demand for goods other than food is expected to increase to $110bn by 2030 from $20bn two years ago as Africa’s biggest economy grows and its working and middle classes seek alternatives to outdoor markets.
While a 40 percent fall in oil prices since June had curbed growth in the continent’s biggest crude producer, the economy was forecast to expand 5 percent in 2016, the International Monetary Fund said last week.
Entry to the Nigerian market requires relatively high capital investment due to inflated rental and power costs, according to Conradie.
Woolworths, a retailer that targets wealthier consumers, said in 2013 it would close its three Nigerian stores because of costs and difficulties with getting products to shops.
Mall developments
‘‘I think anyone coming into the market who wants to have stand-alone stores is going to pay some expensive school fees,” said Conradie, adding that new mall developments by companies, including Resilient Property Income Fund might lead to reduced costs.
“It can sometimes take three to four years to be profitable in these environments,” said Conradie, who has also worked in Angola.
Steinhoff, a furniture retailer, agreed to buy Pepkor in November to expand into clothing and new countries.
The deal, the largest purchase of a South African firm in more than a decade, will create a retailer spanning three continents. Steinhoff shares have gained 29 percent this year, valuing the firm at R271bn.
The increased size of Pepkor would allow it to buy more products for Nigerian stores in bulk, a way to keep prices low in a country where shoppers were used to bargaining, Conradie said. –
Bloomberg