Globally, the rise of e-commerce has been instrumental in driving changes into the retail sector through innovation and the use of technology. 

However, in Sub-Saharan Africa and more specifically in Nigeria, while more players of varying sizes have joined the e-commerce subsector, their performance has not been significant enough to alter mall development strategies or retailers' entry and/or expansion plans. 

"Despite its increasing prominence, the lack of key infrastructure such as adequate warehousing and efficient transport links have meant that extensive distribution networks are not established in the market. "As such, the disruptive nature of e-commerce to the traditional retail sector in Nigeria remains quite limited," says Bolaji Edu, Broll Nigeria CEO. 

Speaking at the Africa Property Investment Summit held on 24-25 August in Johannesburg South Africa and with Broll as the Platinum Sponsor, Edu explains that retailers have been significantly affected by the prevailing macroeconomic conditions and they have since changed their model for growth. 

"One key strategy adopted by many retailers has been to focus operations in the more established malls where their operations record the highest performance." 

As a result, he points out that growth and expansion plans, especially into second-tier cities outside Lagos and Abuja have slowed down significantly and are projected to remain tepid. 

"In this slow market, any kind of growth or expansion by retailers hinges on securing much more favourable leasing terms from prospective landlords with flexible and concessionary conditions," he says. 

Retail rentals 

According to Leonard Michau, Director and Head of Africa Operations: Broll Property Group, asking rentals in some markets, remain high. However, he points out that there has definitely been a softening of rental levels across most retail markets, and in particular, for newly developed malls trying to gain market share.  Furthermore, due to currencies that have devalued over the past three years, there is severe pressure on the rent to sales ratios from retailers. 

He notes that retailers in countries that have experienced sharp currency devaluations over the past 24 months and who rely on imports have to some extent priced themselves out of the market. Prices have skyrocketed while disposal incomes of shoppers have diminished. As a result, many items have simply become unaffordable for many consumers. The luxury apparel sector has been affected, with most consumers turning to value brands or the informal market. Across Sub-Saharan Africa, some retailers have responded by offering lower prices, however, this has affected their ability to meet their rental obligations due to lower margins. 

Gordon Bell, Head of East Africa Operations explains that in Kenya, asking rentals remain high when compared to achievable rents within established shopping centres especially in the wake of oversupply and a narrower retailer base. 

Rental rates largely vary from centre to centre as well as from tenant to tenant depending on negotiation prowess. However, the average achieved rentals range between KSh300/ft squared and KSh350/ft squared (US$31/m² and US$36/m²) per month in Kenya and between US$44/m² and US$66/m² per month in Nigeria with Ghana achieving rentals of between US$35/m² and US$55/m² per month. 

"One cannot overlook the fact that the East African retailer has shilling based revenue and therefore paying rental in US$ does pose a currency mismatch risk which most small operators cannot sustain in the long-term," says Bell. 

Edu says in Nigeria, foreign exchange controls put in place by the Central Bank has limited the ability to access foreign currency and the devaluation of the naira against the dollar resulted in upward pressure on operational costs of which rents constitutes one of the highest components. 

"As landlords seek to meet debt obligations denominated in US$, and prospective developers dependant on imported items for the construction of new malls, rents in Nigeria will continue to be pegged to the US$ leaving it vulnerable to currency volatility," points out Edu. 

Online shopping 

Michau notes that in Ghana, there is increased activity in e-commerce driven by working class individuals making online purchases and having items delivered at their convenience avoiding the chaotic city traffic, however, across many countries in Sub-Saharan Africa, the base is still very low. While e-commerce in Ghana is heavily centred on social media platforms such as Facebook and Instagram, dedicated platforms such as Kaymu, Tisu and Jumia are making strides in the e-commerce market. 

The majority retailers are yet to strengthen their physical space with online options. 

In Kenya, Bell says local shoppers are warming to more click and shop options. Retailers are also looking to expand their online footprint and have showcased their products on online platforms such as Jumia and Kilimali. 

"We anticipate that in future, the evolution of retail options with retailers reducing their brick and mortar occupancy in exchange for a larger online presence will increase. "The trend is expected to grow with 67% of Kenyans classified as active internet users as of 2017," says Bell.  

In Nigeria, while the e-commerce industry shows promise, its performance and growth will depend on the enabling infrastructure (multimodal transport links and warehousing) that can facilitate an efficient distribution network across the country, adds Edu.