Zimbabwe Retail Sector: A look at some of the challenges presented by good economy growth.
By Girland Chibaya
A recent Economic Report for Africa mentioned that Zimbabwe is now ranked among the top 10 economic performers in Africa. While this is good news, what does this mean especially to those South African retail companies that are looking into investing in the country.
A recent trend has shown that most retailers are starting to pay more attention to store growth to both South Africa and Sub-Saharan Africa. For a long time some of these companies have been shunning opening outlets in Zimbabwe, mainly because of the economic instability and the uncertainty associated with the country. The adoption of the green
back has brought about a level of stability and Zimbabwe will undoubtedly attract a few suitors in the retail sector over the next few years or even months.
The biggest mistake that most of the South African companies wanting to open in Zimbabwe are probably going to make is assuming that the Zimbabwean customers are similar to South African customers. This is definitely not true for many reasons some of which are outlined below. My biggest advice to those retail companies wanting to operate in Zimbabwe is: please their research first.
Economists and businesses often use the term market to define various customer groupings. Unlike the South African market, the Zimbabwean market is mainly homogeneous with most people having the same buying preferences. This has made it easy for big supermarkets to penetrate the market without having to define their stores by which region that
they are located. The common means of segmenting consumer markets especially in South Africa is to use demographic segmentation whichinvolves defining the market based on population behaviour. In Zimbabwe when one looks at the food or even clothing retail, most preferences are the same across the whole country and hence it becomes senseless to use this form of segmentation when looking at consumer behaviour.
The economic slump in Zimbabwe over the last decade unfortunately happened when the whole world was going through an intensive phase of globalisation. The mass exodus of the predominantly educated middle class to the diaspora did contribute to the distortion of customer demand patterns in the country. The country’s top LSM percentage had
been moving steadily upwards until the last decade when there was a sudden halt or even decrease in the number of people who would be classified as being above LSM6. First and foremost the way LSM is measured as well completely becomes meaningless when you try to apply it to the Zimbabwean population. For example variables like, having a built in kitchen sink, electric stove and hotplate, having VCR, or driving a sedan car are part and not all of the variables used in measuring LSM ratings. The following variables are used to calculate the LSM level is South Africa for example:
1Hot running water
16 Less than 2 radio sets in household
17 Hi-fi/music centre
3 Microwave oven
18 Rural outside Gauteng/W Cape
4 Flush toilet in/outside house
19 Built-in kitchen sink
5 No domestic in household
20 Home security service
21 Deep freezer
7 Vacuum cleaner/floor polisher
22 Water in home/on plot
8 No cell phone in household
23 M-Net/DStv subscription
9 Traditional hut
10 Washing machine
11 PC in home
26 Sewing machine
12 Electric stove
27 Non-Urban outside Gauteng and Western Cape
13 TV set
28 Motor vehicle in household
14 Tumble dryer
15 Home telephone
Looking at all the items listed above it can be clearly seen that a lot will not apply to the Zimbabwe consumer. Not only does most of the population reside in the rural areas in Zimbabwe, the main and biggest challenge comes from the fact that there is no electricity in most households. Zimbabwe needs 1402 megawatts (more than 10% of this is imported), to meet the demands for electricity in the country, this is peanuts compared to South Africa which generates 34 000 megawatts of electricity to meet the current demand. We then have a situation where the whole of the population ends up being graded below LSM6 because they can’t use let alone afford to buy any of the electrical appliances listed above. So is it right to use the same criteria listed above for Zimbabwe consumers. The answer is no. If the answer is no, then it could be dismal for both food and clothing retailers that go into Zimbabwe without doing sufficient research because they will stock their stores with products that are not required by the customers resulting in in huge inventory keeping costs or loses realised from wasting expired food stocks. Zimbabwe, like most African countries has a very low population of
non-black people with local black people making up 98% of the population. The majority of these are Shona people who make up 70% of the people. The white population dropped from a peak of about 5% during pre-independence to currently less than 1% with most migrating to South Africa or Europe at the height of farm invasions. This combined with the predominantly conservative fashion tastes among the Zimbabwean rural population would make it difficult to master their
shopping behaviour. Besides all this complexity around the consumer behaviour there is an added headache of the fact that the country has been lagging far behind in terms of technology. For example if you think internet is slow in South Africa, then internet speeds in Zimbabwe are way slower. The whole world is moving towards the use of internet to do shopping with most retail companies in South Africa having websites that a consumer can use to shop online and have items delivered at their doorstep. The question, is how long will it take for Zimbabwe to reach this stage of technological development? And when we do, will the whole world still be waiting for us or they will have moved onto the
next level…only time will tell.