THE first continental survey of urban African consumer behaviour, published on Tuesday by consultancy McKinsey, reveals a "surging consumer market" that is both price-and brand-sensitive and internet-savvy.
The survey, which aims to assist companies in targeting markets in Africa, was conducted in 10 countries and among 13,000 consumers. McKinsey is a leading proponent of the view that Africa represents the new frontier of global economic growth and business opportunities.
"Poverty and unemployment are still widespread on the continent, more so than in other emerging markets.
"But fundamental macro-level trends are encouraging the emergence of more prosperous consumers, who in turn are contributing to rapid economic growth and employment in Africa," the report reads.
Bill Russo, a director of McKinsey & Company based in Johannesburg, said on Tuesday that among the most startling insights provided by the survey was the extent to which it is expected that consumer industries will drive the continent’s future growth.
Consumer industries are expected to have $400bn growth, equal to half the total revenue all businesses are likely to generate in Africa by the end of the decade.
Many companies will be surprised to learn that commercial opportunities in Africa are highly concentrated and thus easier to access than might have been expected, said Mr Russo. Ten out of the continent’s 53 countries — Algeria, Angola, Egypt, Ghana, Kenya, Morocco, Nigeria, South Africa, Sudan and Tunisia — accounted for 81% of private consumption last year.
About 40% of Africa’s people live in cities, making Africa more urbanised than India and almost as urbanised as China.
Rapid population (Africa has the youngest and fastest-growing population in the world) has also been matched by rising incomes. By 2020 more than half of African households are projected to have a discretionary income — that is, have cash for goods other than food — rising from 85-million households today to 130-million.
A third valuable insight, said Mr Russo, is to be found in the preferences and expectations of African consumers.
"The price, quality and brand combination is very interesting. While it is not a surprise that price is important, what is surprising is how important quality and brand are," he said.
While African consumers have in the past often been limited to cheap, poor quality, unbranded products, the McKinsey research indicates that companies operating in this way are unlikely to succeed in the long-term.
Quality is second only to price among African consumers and brands play an important role in purchase decisions. In North and sub-Saharan Africa, brand loyalty averages around 58%.
While the penetration of online shopping is extremely low and likely to stay that way for some time, the use of the internet, via cellphones, is widespread.
More than 50% of urban Africans said they had accessed the internet in the past four weeks, mainly for social media. That is on a par with figures for urban China and Brazil.
The regular use of social media has a range of implications for marketing and how a company understands the consumer, Mr Russo said.
The expected consumer growth, as well as wealthier consumers, would inevitably lead to a formalisation of shopping, according to the study. Formal retailing is beginning to take off in Algeria, Angola and Nigeria with a growing premium attached to the in-store experience. Shoprite is now operating in 16 countries, Massmart in 15, including Mozambique, with retailers such as Mr Price also on an expansion trail.