Market forces transforming the African retail landscape

Cosmetics giant L’Oreal’s partnership with pan African e-commerce platform Jumia signals a big shift in the way consumer packaged goods companies  address the challenge of reaching the emerging African consumer classes in a cost effective manner. A combination of market forces and on the ground realities points to this solution as a sweetspot for optimal outcomes.

Business challenge for cosmetics

On their website, they acknowledge the complexity of informal distribution networks as a major barrier to cost efficient and optimal reach.

loreal

Source: L’Oreal website

At the same time, they recognize that their largest markets are served by the very same fragmented and informal retail networks that pose such a challenge to their distribution and sales.

Connectivity and Communication

Smartphone penetration is growing exponentially across the African continent, as is the phenomenon of online retail. When you consider the trends, its not difficult to make the informed assumption that the customer segment representing this early majority is urban, affluent and informed. They are also likely to be the most relevant segment for international cosmetic brands.

Getting in on the ground floor

Given these factors, it makes sense for L’Oreal to leapfrog the entire distribution chain, with its diversity and informality, and make straight for their customer’s doorstep.

As e-commerce businesses grow and develop, they are changing the landscape of the retail and distribution environment, offering brands a way to quickly and easily (as well as cheaply) test the waters with their product range before investing in more extensive sales and distribution channels.

These early partnerships are a signal of the way the ambitions of the globally connected African consumers aren’t going to be held back by the limitations of their environment.

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