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It is a great time to invest in SA, says Nielsen expert

Jun 15 2016 15:07
Carin Smith

Cape Town – Now is a great time to invest in South Africa, because of the weak rand, Steve Matthesen, global president of retailer services at research firm Nielsen said on Wednesday.

He was a speaker at the 60th Global Summit of the Consumer Goods Forum, which is taking place at the Cape Town International Convention Centre (CTICC) until Friday.

“The best time for investment in emerging markets might also be the roughest time. Your CFO might not like you saying that but now is a great time to invest in South Africa, for instance, due to the weakness of the rand,” said Matthesen.

Matthesen highlighted various strategies for success, while speaking about ways to navigate the new retail agenda.

These include for retailers to still think about emerging markets, to build their brands, to realise consumers demand convenience, to realise online will continue to be the biggest disruptor in the industry but to see it as “the gift that keeps on giving” and to think about how to make the use of promotions more efficient.

“Emerging markets are getting wealthier and the purchasing power in these markets is growing. Companies doing the best in these markets are the ones who have been there for a while already. Big brands cannot just think they can come in and take over. There are also local competitors who know the market and can move quickly,” said Matthesen.

“Emerging markets are complicated and retailers need to approach them with a variety of options.” He warned that it would be detrimental for any business to think they can use an average for all emerging markets.

Matthesen pointed out that a general retail myth is that “bigger is always better”. He emphasised that the reality of the retail landscape is that big stores can be “hard to shop”. On top of that not everybody has a car or storage space. Global shoppers tend to go to buy fresh food about 2 to 5 times per week.

E-commerce is another factor changing the “bigger is better” store myth. Technology, for instance, enables smaller stores to be more efficient.

“Traditional stores continue to thrive by being close to their consumers and focused on assortment, “explained Matthesen.

In Africa and the Middle East traditional trade remains key in retail. It is, therefore, important for retailers to fit the lifestyle of consumers.

“There is also a trend of the modern meeting the traditional trade – trying to match the store format to the local fit. This is, therefore, an opportunity to create convenience by thinking local,” he added.

Another myth Matthesen cleared is the effectiveness of retail promotions to drive consumers to a store.

“The retail industry is addicted to promotions and it is not working. People are doing more and more events and that leads to the effectiveness going down and retailers not getting ‘bang for their buck’ like they used to,” said Matthesen.

A Nielsen survey showed that although consumers still regard price as important, it is only their number four top priority. The three more important factors are fresh and high quality produce, a conveniently located store and the products on offer and how they are set up.

“There is a still a lot of opportunity in retail. It is, however, important to dust off innovation as half of the consumers surveyed are willing to pay more for differentiation,” he said.

“Make innovation a priority by finding unmet needs. Promotions are still key to drive traffic to a store, but don’t over-rely on them and do not have too many, but rather get more out of the ones you do present.”

Matthesen further pointed out that it is a myth that the grocery space does not have to worry about e-commerce.

“The reality is that we will see it change. There is rapid change as online sales of fast moving consumer goods are growing at 20% per year. Therefore, the role of physical stores will change,” he explained.

“Certain categories work well online, like baby goods and packaged goods. The omni-channel is the new retail reality.”

The big question is about what the tipping point will be in order for consumers to do all their shopping online. That is why there is such a lot of talk about delivery options at the moment in order to try and get rid of existing barriers for this move online.

“Most people do not like going to the grocery store to shop, so if it can be made more attractive to them to do it online, they will do it,” said Matthesen.

“Stores will not disappear, but shopper expectation will change. You must really understand your shopper, think mobile first and re-imagine how the different retail categories are bought and sold. It is about locking in the loyalty of consumers.”

 

investments  |  emerging markets  |  retail
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