The retail market in Nigeria has been experiencing significant challenges that have led to the closure of some prominent retail malls. In January, Shoprite, one of Nigeria’s major retail players, shut down its operations at the Ado Bayero Mall in Kano. According to the company’s Chief Operating Officer, this decision stemmed from the increasingly difficult economic conditions in the country.
Similarly, in June, the Shoprite store at Novare Wuse Central Mall in Abuja ceased operations, with the CEO of Retail Supermarket Nigeria (RSN) citing financial strain and an unfavorable business climate as key reasons behind the closure.
These closures reflect broader issues within Nigeria’s retail market, influenced by economic pressures, rising operational costs, and evolving consumer behavior. As the country’s retail landscape changes, several factors have contributed to the decline of retail malls in Nigeria. Below are six reasons behind this trend:
1. Economic Challenges
Nigeria’s economy has faced significant challenges, including fluctuating oil prices, inflation, and currency devaluation, all of which have reduced consumer purchasing power.
As a result, many consumers are cutting back on non-essential spending, leading to decreased footfall in retail malls. In turn, many retail operators unable to sustain operations are shutting down.
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2. E-Commerce Growth
E-commerce growth in Nigeria is transforming the retail sector. Internet access rose from about 26% in 2018 to over 38% in 2022, with an estimated 83 million users as of 2022. By 2027, nearly half of Nigeria’s population is expected to have internet access, contributing to a substantial shift in shopping habits. according to PCMI research and analysis, Nigeria’s e-commerce market reached $15 billion in 2023, and is projected to grow to $33 billion by 2026.
This mirrors a global trend, where online retail sales are expected to exceed $8 trillion by 2027. As more consumers turn to the convenience of online shopping, traditional retail malls face pressure to adapt. Malls that do not embrace digital solutions or create online shopping options risk falling behind in this evolving retail landscape.
3. Changing Consumer Preferences
Consumer preferences in Nigeria are increasingly leaning toward the convenience of online shopping. Many consumers now prefer to purchase products from the comfort of their homes, driven by the accessibility and ease that e-commerce platforms provide.
This shift has altered traditional shopping habits, leading to a decline in foot traffic at retail malls. As a result, malls that do not adapt to this new preference for online purchasing face challenges in maintaining customer engagement and sales, ultimately affecting their overall performance
4. High Operational Costs
Running a retail mall in Nigeria can be very expensive. Key operational costs include:
- Rent and Leasing Fees: High rent in prime locations significantly impacts profitability, especially with declining foot traffic.
- Utilities: Fluctuating expenses for electricity, water, and waste management can strain budgets.
- Maintenance and Repairs: Regular upkeep is essential, but costs can escalate, particularly in older malls.
- Security Services: Hiring security personnel and investing in surveillance systems add to operational burdens.
- Service Charges: Fees for services such as cleaning, landscaping, and facility management contribute to overall operational costs, affecting tenant retention.
As revenues decline due to changing consumer preferences and e-commerce competition, many mall operators struggle to manage these costs. This jeopardizes their sustainability and leads to potential shutdowns.
5. Infrastructural Issues
Nigeria faces a lot of infrastructural challenges, some of which are: unreliable electricity supply, poor road conditions and inadequate transportation systems. These issues can deter customers from visiting retail malls, as inconvenient access often leads consumers to seek alternative shopping options.
Malls who fail to address these infrastructural challenges may find it increasingly difficult to attract and retain customers, ultimately impacting their profitability and viability.
6. Security Challenges
Retail malls in Nigeria face serious security challenges that can discourage customers from visiting. Issues such as theft, robbery, and violence significantly affect the retail environment. There have been cases where retail malls had to close due to these security concerns.
In May 2024, Banex Mall in Abuja temporarily shut down operations following incidents of violence on the premises. Such occurrences not only diminish customer confidence but also tarnish the reputation of the mall, leading to a decline in foot traffic.
Mall operators who fail to implement adequate security measures risk losing their customer base, making it increasingly difficult to sustain their operations.
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