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6th Lagos Economic Summit

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Title: 6th Lagos Economic Summit


1
6th Lagos Economic Summit EHINGBETI 2012 From
BRICS to BRINCS Lagos holds the key
Presentation by Anton Wagenaar
2
Organised Retail
  • What is organised retail
  • The founder of Wal-Mart, Sam Walton said it best,
  • The secret of successful retailing is to give
    your customers what they want. And really, if you
    think about it from the point of view of the
    customer, you want everything a wide assortment
    of good quality merchandise the lowest possible
    prices guaranteed satisfaction with what you
    buy friendly, knowledgeable service convenient
    hours free parking a pleasant shopping
    experience.
  • The USA is the best example for organised retail
  • U.S. Commerce department reports total retail
    sales in 2011 were 4,7 trillion, which
    represents an 8 increase over 2010 total retail
    sales. This includes companies that are solely
    retail and companies with significant retail
    operations (motor industry Ford, telecoms
    Verizon Wireless, etc.)

3
Organised Retail
Economist report (14 April 2011) Send for the
Supermarketers
4
Organised Retail industry in BRICS
  • A.T. Kearney Global Retail Development Index
    (G.R.D.I.)
  • ranks the top 30 emerging countries for retail
    development.
  • 2011 Ranking
  • Brazil
  • A GDP growth of close to 5 percent is expected
    through 2013, and preparations for the 2016
    Olympic Games and 2014 FIFA World Cup are
    expected to generate more than 50 billion in new
    investment.
  • Brazil, with a population of 193.3 million, is
    now the world's eighth-largest economy, and the
    government is bolstering long-term GDP growth by
    increasing infrastructure investments.
  • Shopping malls, which account for one-fifth of
    retail sales, have exploded, with 16 openings in
    2010, 25 in 2011 and 30 planned for 2012
  • Formal retail amounts to approximately 230
    billion

5
Organised Retail industry in BRICS
  • A.T. Kearney Global Retail Development Index
    (G.R.D.I.)
  • ranks the top 30 emerging countries for retail
    development.
  • 2011 Ranking
  • India
  • Organized retail accounts for 7 percent of
    India's roughly 435 billion retail market and is
    expected to reach 20 percent by 2020. Big-box
    retail, in the form of hypermarkets, has gained
    prominencea refocus from the burgeoning
    supermarkets and small formats of several years
    ago.
  • The Economic Times reports that the year 2011 saw
    the addition of over 1,5 million square meters of
    organised retail space across the country.
  • India has the highest number of retail outlets in
    the world at over 13 million retail outlets, and
    the average size of one store is 50-100 square
    feet.
  • Formal retail amounts to approximately 30
    billion

Total number of retail outlets in select countries (in 000) Total number of retail outlets in select countries (in 000) Total number of retail outlets in select countries (in 000) Total number of retail outlets in select countries (in 000) Total number of retail outlets in select countries (in 000) Total number of retail outlets in select countries (in 000) Total number of retail outlets in select countries (in 000)
Country 2002 2003 2004 2005 2006 2007
India 11,689 12,049 12,408 12,770 13,122 13,448
China 5,463 5,208 4,854 4,635 4,503 4,496
Brazil 976 1,006 1,071 1,122 1,157 1,188
Russia 437 447 456 466 475 480
             
USA 923 923 934 945 946 946
UK 314 312 308 302 298 295
France 416 411 409 407 406 206
Germany 288 286 284 283 281 281
Source Euromonitor Source Euromonitor Source Euromonitor Source Euromonitor Source Euromonitor Source Euromonitor Source Euromonitor
6
Organised Retail industry in BRICS
  • A.T. Kearney Global Retail Development Index
    (G.R.D.I.)
  • ranks the top 30 emerging countries for retail
    development.
  • 2011 Ranking
  • China
  • China's retail market size is 2.1 trillion, or
    roughly 50 percent of the U.S. retail market, and
    retail growth remains strong at 15 percent
    between 2009 and 2010.
  • Retail industry consolidation continues, with the
    market share of the top 20 retailers increasing
    from 8.4 percent to 8.9 percent from 2009 to
    2010.
  • Formal retail amounts to approximately 420
    billion
  • Russia
  • McKinsey and company reports the Russian economy
    recovered from the downturn, with the retail
    market returning to pre-crisis levels and
    expected to grow at a CAGR of 10 percent over the
    next five years. Food retail is at pre-crisis
    levels, while non-food retail is expected to grow
    faster.
  • Russia is hampered by its relative political
    instability and a drop in newly created retail
    sales area. Still, the fact that Russia
    (population 141.9 million) is expected to become
    Europe's largest consumer market with rising
    disposable incomes and an expanding middle class
    makes it a priority for many retailers seeking
    long-term options.
  • Formal retail amounts to approximately 195
    billion

7
Organised Retail industry in BRICS
  • A.T. Kearney Global Retail Development Index
    (G.R.D.I.)
  • ranks the top 30 emerging countries for retail
    development.
  • 2011 Ranking
  • South Africa
  • At the end of 2009, South Africa had about
    seventy major shopping malls in all major urban
    and tourist centres. Most were to be found in
    Johannesburg, 23 of them. Some of the biggest
    shopping malls are also in Johannesburg, like
    Eastgate and the newly enlarged Cresta.
  • Another mega shopping mall is the Gateway in
    Umhlanga, just outside Durban, which offers
    150,000 square metres of shopping.
  • Cape Town's Victoria and Alfred Waterfront
    shopping mall has over 400 stores to cater for
    all shopping needs, budgets and tastes. Other
    exclusive centres are Johannesburg's Sandton
    City, Nelson Mandela Square and Hyde Park.
  • Formal retail amounts to approximately 40
    billion
  • Nigeria
  • Wholesale and Retail Trade is 16 of GDP of which
    95 according to the Oxford Business Group is
    informal
  • Nigerias total GDP (2010) was 193 billion with
    formal retail amounting to approximately 1,5
    billion.

8
Benefits of organised retail / anchor tenant
  • Any large scale mall development needs reputable
    anchor tenants to drive traffic in these malls
    Cinemas / Clothing / Food retailer / Media store
  • A Food retailer is a critical aspect in the
    development of large malls
  • Food retailer makes a cash flow investment of 8
    to 10m
  • Further investment in terms of a 10 year lease
    agreement guaranteed of 12m
  • Retail property developer needs this food
    retailers lease agreement to secure finance over
    the rest of his mall (banks require lease
    agreement from an reputable food retailer).
  • The mall developments able to give local Nigerian
    retailers an opportunity to develop their own
    businesses as well.
  • Certainty of tax / duty payments for the Federal/
    State Governments
  • Regulatory compliance
  • Easier for regulators to liaise with organised
    retail
  • Regulators use organised retail as a benchmark to
    analyse the rest of the market
  • Employment capacity
  • Anchor tenant (200 to 230 direct and indirect
    employees)
  • Mall project (overall between 500 to 1,000
    employees)
  • Employee training and development
  • Retail is globally one of the largest employers
    (50 of all Australians employed or previously
    employed in retail it is in India second after
    agriculture in size of the number of employees)

9
Benefits of organised retail / anchor tenant
  • Economies of scale can lower prices for consumers
  • Additional investment in supply chain to maintain
    competitive edge
  • Added cold chain facilities for perishables.
  • Shoprite was able to convince South African/
    Zambian manufacturers to enter Nigeria Tiger
    Brands, Zambeef, National Brands, Clover, Rainbow
    Chickens, Pep stores, Spec savers, etc.
  • Farmers / S.M.E. see the benefits to supply a
    large retailer
  • Certainty of market and able to negotiate pricing
    directly with the retailer
  • Large retailers have distribution centres to
    distribute products
  • Promotional opportunities for farmers and local
    suppliers to reach a large number of customers in
    a short time
  • Shoprite has 250 local Nigerian suppliers and
    farmers and therefore only import 24 of what it
    sells.
  • Manufacturers able to work with organised retail
    to analyse the performance of their range of
    products or their promotional activity
  • It adds to the quality of life for the general
    public
  • Clean and relaxing atmosphere
  • Uplifts the community around the Mall
  • Strong retailing sector promotes tourism
  • Malls have cinemas, coffee shops, kids
    activities, etc.
  • Malls in Asia have waterparks, roller coasters,
    etc.

10
Mall development analysis
  • Mall development takes 2 years to construct and
    between 1 to 3 years prior to this to
    conceptualise and plan
  • Road infrastructure is a critical aspect
  • Easy access for customers and service/ delivery
    vehicles
  • Parking must be at least 3 or 4 parking bays per
    100m2 of lettable area
  • Close to residential areas
  • Mall developments cost is between 70m to 120m
  • Cost of land cannot exceed 10 of the
    developmental and construction cost and
  • Private equity investors trying to find other
    means to unlock the value of the land to make it
    equitable for the land owner to reduce his share
    of equity at the start of the project.

11
Challenges to invest in RetailProperty
Developments
  • Securing land for property developers
  • Land difficult to open up
  • Time consuming
  • Finance charges high
  • Naira interest rates extremely high (24)
  • Dollar finance also expensive
  • Construction cost high (double South Africa
    according to Actis)
  • Getting Federal and State Government to support
    these investments
  • B.O.I. partnership to support SMEs
  • F.G. to see value of retail investments to
    enhance the overall supply chain
  • Road networks to support retail infrastructure
  • Manufacturers to assist in analysing the value
    chain especially for far outlying stores (Enugu)

12
Conclusion
  • We believe formalized retail is an integral part
    of the complete value chain of any country
  • We do not believe agriculture and manufacturing
    alone can develop Nigeria. Formalised retail is
    also needed to complete the entire value chain in
    the country.
  • The investment in each Mall / Store is
    significant which shows our long term commitment
    to invest in Nigeria. We already have 3 stores in
    Lagos alone
  • Formalized retail uplifts various industries and
    farmers
  • It is one of the largest employers in the world
  • We are more than willing to work with the Federal
    and State Governments to be part of the process
    to develop Nigeria in becoming the 20th largest
    economy by 2020.
  • Thank you
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