Continuing the thoughts expressed by Yacine in the previous post, I’d like to explore these rankings and their value. We’ll use the example of Tanzania, ranked 5th by AT Kearney in their 2015 African Retail Attractiveness Index (ARDI).

The ARDI states:

Tanzania is starting from a low base: With only 30 percent urbanization, high poverty levels, and less than $2,000 GDP per capita, Tanzania is in the early stages of development. Therein lies the opportunity—the unsaturated market has one of Africa’s fastest growing retail sectors, boosted by new shopping malls. Compare this with Kenya, which has one of Africa’s most developed markets—but also one of its most saturated.

By the less than clear metrics used in this Index (Kenya, for example, has surprisingly never managed to be ranked at all), Tanzania is a high potential market for a long term retail investment strategy. Yet nowhere is there any mention of local consumer behaviour or purchasing patterns.

The ARDI assumes that a “shopping culture” attractive to modern retailers will emerge organically as these nations develop economically and infrastructure wise.

Last year, South African retail giant Shoprite pulled out of Arusha in Tanzania. Arusha is a major international diplomatic hub, thus no less attractive to supermarket chains than Tanzania’s commercial capital Dar es Salaam.

Here’s some insight from the local paper, that offers some food for thought, and a clear signal that one cannot rely on metrics and rankings alone when considering an opportunity in these attractive yet challenging markets.

With many of Arusha residents still living in single rooms, thus few can afford to buy groceries in advance due to lack of storage space and therefore choose to shop when the situation arises then consume whatever was bought on spot.

A child will be sent to buy things like sugar, rice, cooking oil and charcoal for fuel three times a day; for breakfast, lunch and dinner, the shopping trend will again be repeated on daily basis.

As the result, the city is now dotted with hundreds of small grocery stores capable of breaking their stock down to the last grain in order to accommodate the economy and space conscious customers.

Boasting a population of 500,000 residents and additional 100,000 daily visitors, it comes as surprise that ever since it was made a township in 1948, Arusha has had only one supermarket to date.

Even worse, the one and- only supermarket, which opened here in 2002 courtesy of South Africa’s Shoprite- Checkers, has just fled from the city citing the lack of supermarket culture among Tanzanians but especially those living in Arusha.

[…]

But come 2014 and Shoprite, the supermarket which started it all, announced that it was closing shop, complaining that the large store business had totally failed to pick up even after 12 years of operating in the city.

The South African Supermarket chain somehow did not conduct any research prior to venturing into the Tanzanian market especially Arusha where people buy their groceries only during the time when they need them.

Supermarket shopping usually means walking into the large department store, pushing a cart and then loading one item after another onto the basket before checking out through the computerised counters handled by bored ladies.

It also means that a person or family has to make their weekly or monthly purchases once, and then store everything in the house until the next shopping date. That may require special storage cellars at home, refrigerators, deep-freezers and cabinets, not forgetting the cars required to carry everything home in the first place.

However, in Arusha where accommodation space is hard to find, most residents are forced to live in single rooms or cubicles that serve as living rooms, bedrooms and kitchen at the same time.

With hardly any space to store rice, flour, oil and other groceries, for future use, few ever think of practicing supermarket shopping.

It is the unquestioned assumption that lack of modern retail or formal economy institutions imply lack of an existing shopping culture – local & relevant & appropriate to its context and conditions. The real question is whether a region or country is ready for formal retail culture.

This newspaper article isn’t hard to find, supermarkets in Tanzania would uncover it easily, were the analysts working on these indices and reports considering the entire ecosystem of the operating environment in which retail would operate rather than easily measurable indicators.

These insights are not enough on which to base one’s market entry strategy but more than sufficient to make one pause and evaluate whether a more qualitative and exploratory market survey offering consumer insights and buyer behaviour might actually be worth investing in far more in the first instance than years of losses later. This is exactly the kind of moment you’d want to call us in to help you craft your strategy.