Retail giant, Shoprite, faces collapse over strategic errors, fierce competition 

“We’re reorganizing” — Mgt

Struggling retail consumer goods giant, Shoprite Nigeria, is currently battling to stay afloat as many of its branches across the nation continue to shut down, Business Hallmark can report.

According to findings, while several branches from the firm’s 25 outlets around the country have permanently shut down, the remaining that are still in operation are operating below optimal level.

From a place bustling with high traffic and sales, the stores have turned into a shadow of themselves.

The Cape Town, South African headquartered retail firm, it would be recalled, first began business in Nigeria in December 2005 from the upscale Adeniran Ogunsanya Shopping Mall, Surulere, Lagos.

It soon spread to other parts of the city and states across the country, displacing open stalls and small neighborhood shops.

According to information on the official website of Shoprite Nigeria, https://shoprite.ng, the firm has twenty-five stores located in the country, especially in states capital.

Within a very short period of berthing in the country, Shoprite stores became the go-to shops for millions of middle-class shoppers across Nigeria looking for bargained consumer goods like groceries, frozen foods, drinks and beverages, packaged foodstuffs like flour, rice, wheat and sugar, household electronics, as well as freshly baked foods like bread and pastries.

Apart from being the points of call for many Nigerians in search of good prices, Shoprite outlets turned to tourists centers for shoppers and sightseers alike looking to experience a taste of the elegant accouterments and grandeur of the facilities in the malls housing the stores.

Business Down-turn

Unfortunately, the roller-coaster of good fortune didn’t last. The Nigerian economy soon suffered a vicious dovetail as a result of the crude oil price shock of late 2014, which pushed the economy into recession.

The already dire economic situation during Goodluck Jonathan’s administration was further exacerbated by the policies of the succeeding All Progressives Congress administrations of former President Muhammadu Buhari and incumbent President Bola Tinubu.

Empty shelves

The resultant shocks, especially foreign exchange  volatility, high cost of living and galloping inflation, resulted in the near wiping-out of the middle-class, which survivability of businesses like Shoprite is anchored upon.

Unable to continue to absorb the huge losses it was incurring, Shoprite Holdings Limited (SHL), the parent body of Shoprite Nigeria, announced it was pulling out of Nigeria in 2020.

In June 2021, SHL announced the completion of the transfer of its stakes in Shoprite Nigeria to a local firm, Ketron Investment, under a franchise deal.

With the exit of SHL and the successful transfer of the company to Ketron, many Nigerians expected a drastic turnaround in the company’s fortune.

However, four and half years after, Shoprite Nigeria’s fortune has not improved. Rather, it has taken a turn for the worse.

While several branches have closed down, the ones opened for businesses are barely hanging on as the hangman’s sword hovers above their heads.

BH findings revealed that, at least, five branches of Shoprite, including the Wuse branch in Abuja, Kano, Ibadan in Oyo, and Ilorin in Kwara are no longer operating.

For instance, checks showed that the Shoprite store located in the Ado Bayero Mall on No. 6, Zoo Road, Trade Fair Complex, Kano which was shut down in January 2024 has been renovated, carved into two and rented out by its owners to two new tenants, Ni9ne, a retail store and Bedmate, a furniture company.

In the same vein, Shoprite Nigeria’s outlet in Wuse, the Federal Capital Territory (FCT), Abuja and the two stores on  Adeoyo/Ring-road (opposite Oyo State High Court Complex), Iyaganku, and MKO Abiola Way, Mokola, Ibadan, the Oyo State capital, are no longer operating.

Sources in The Palms Mall, where the Ring-road, Ibadan store is located, informed our correspondent that the facility has not opened its doors to customers in 2025.

Like the Kano and Oyo State outlets, the Ilorin, Kwara State, Shoprite branch on Fate Road (besides the Federal Secretariat building) is also currently out of service.

Empty Shelves

While the remaining Shoprite stores across the country are still opening their doors for businesses, trading activities are slow as their shelves are largely empty.

The condition of the firm’s store at the Ikeja City Mall (ICM) was quite pathetic during BH’s two recent visits.

From a place that used to bustle with high traffic and sales, the Shoprite Ikeja City Mall store has turned into a shadow of itself.

Our correspondent observed that about 60 percent of shelves in the store are empty, while the remaining 40 percent are half empty.

The only redeeming department in the large supermarket is the freshly baked  section where shoppers were seen buying bread and pastries like meat and chicken pies, cakes and sausages.

Prices of these products, BH observed, are much lower compared to the ones in competing bakeries, eateries and confectionery stores, a major factor that is driving traffic to the section.

Bad Financial Decision

Meanwhile BH findings revealed that apart from the collapse of the nation’s economy earlier mentioned, Shoprite’s present headaches are largely self-inflicted.

For instance, findings have shown that Shoprite Nigeria is been haunted by costly decisions taken in the past by its leadership, especially its decision to operate from rented facilities built by real estate developers.

Rather than building and owning its own stores, the management of Shoprite, sources informed our correspondent, entered into long-term arrangement with developers to develop and maintain high-end shopping malls like the Ikeja City Mall, Adeniran Ogunsanya Mall, The Palms, Novare Lekki Mall, and Ado Bayero Mall with Shoprite as tenant.

While the economy was bullish, Shoprite’s management, BH learnt, were contented with paying the huge rental and service charges demanded by the owners of these facilities, who mostly charge in dollars.

But things changed when the economy went into recession and the purchasing powers of many Nigerians were negatively affected, resulting in lower revenue for the firm.

While Shoprite’s management was able to weather the initial storm by managing the little income generated from sales, it soon began to feel the heat when revenue dried up.

As a result, the management of the company started defaulting in the payment of rents and other expenses like  service and utility fees.

A reliable source in the company informed our correspondent that the retail outfit was paying a monthly rental fee of N66 million for the space in the Ado Bayero Mall where Shoprite operated from before it was shut down.

“In the last three years before it was shut down, we struggled to pay the N66 million monthly rent for the facility, which rises to N792 million yearly.

“Meanwhile, this payment does not include other expenses like electricity bills, maintenance charges, parking fees, and personnel and logistics (haulage, e.t.c) costs, which are also huge,” the source, who begged to remain anonymous disclosed.

Findings by BH showed that  what Shoprite spent monthly on rents, maintenance charges, electricity bills, parking fees and other expenses in Kano is a child’s play compared to the humongous amount pumped into servicing its Lagos operations.

For instance, Ikeja City Mall, the landlord of Shoprite Ikeja, is one of the most expensive commercial properties in Nigeria. It cost between N750,000 to N2.5 per annum for a square meter in the mall, with Shoprite occupying over 300 square meters prime space in the mall.

Dollar Cost

Though BH could not independently confirm this figure, several sources disclosed that the firm pays a yearly rent of N1.550billin for the large space it is occupying in ICM.

“The rent might look huge to many. But it wasn’t like that at the beginning. It was naira devaluation that pushed it up to that amount.

“It is an open secret in the real estate sector that most upscale properties are prized in dollars. Let me surprise you that some tenants, especially foreign companies, pay as much as $2.5 million to $5 million annually on the properties that host their offices in Nigeria.

“What I am driving at is that the same space Shoprite is currently occupying at Ikeja City Mall used to go for $1 million annually when it started operations in 2011.

“While the average exchange rate was N155 in 2011, it stood at N460 in 2023 when naira was heavily subsidized. In essence, Shoprite was paying just N155 million and N466 million when the naira was stable.

“You can see how badly the FX  crisis affected the company? And we are only talking about rent. Other costs, which we did not mentioned here like products importation and their transportation are also denominated in FX.

“Nigerians can now see why Shoprite ran into trouble. Had it been that they outrightly own their own stores, they won’t be in this difficult situation,” a source in Shoprite Ikeja told our correspondent.

Just like the high rent,  maintenance costs charged by the managers of ICM creates huge holes in the pockets of the mall’s tenants, especially bargain-offering outfits like Shoprite.

Each tenant in the mall pays between N2 million to N25 million monthly for water, electricity, cleaning services, waste disposal, security, and the rest.

Apart from this, each tenant pays a monthly parking fee of N57,600 and tag fee of N32,000 respectively, while their customers pay N300 per hour parking fee and flat entry rate of N350 after 8pm.

For customers, who patronize high-end joints like cinemas, boutiques, bars, and lounges inside the mall and spend many hours (some until the next morning, this is huge expense.

As a result, many old Shoprite customers looking for bargains have abandoned the mall.

Fierce Competition

Another challenge that is pushing Shoprite Nigeria towards insolvency is fierce competition from competitors.

In the last 10 years, more efficiently run and pragmatic retail stores like Bokku, Adidde, Justrite, Jendol, and Best Bargains have sprung up to challenge Shoprite by offering lower prices.

These latter day competitors, our correspondent gathered, source about 80 percent of their stocks from local manufacturers, compared to Shoprite, which relied heavily on importing its products. Unfortunately, the crash of the naira has made Shoprite’s imported products to be uncompetitive in the market.

Foreign exchange crisis, rising inflation, and a debilitating port congestion have made import-dependent businesses like Shoprite struggle to keep their shelves stocked. When they are lucky to bring the products into the country, they become overpriced and unattractive to buyers.

Also, unlike Shoprite, which sets up shops in upscale rented malls, its competitors like Bokku and Justrite largely own the properties where they operate from.

These new stores, unlike Shoprite stores, which are few and located far from each other, are sited in neighborhoods close to buyers and devoid of traffic.

Where they don’t outrightly own one, the competitors avoid upscale facilities like the ICM, Novare and The Palms for relatively cheaper accommodations, which brings down their operating costs/prices of goods.

BH sampling of prices of goods sold by Shoprite and its competitors show that apart from its freshly baked products like bread, which are competitively priced because over 90% of their ingredients are sourced locally with naira, prices of other Shoprite products are 20% to 40% more expensive.

A week-long survey conducted by BH at the Ikeja City Mall indicated that majority of  visitors to the mall, with the exception of the few deep-pocketed Nigerians and foreigners, who often patronize specialized stores that provide premium services like  Silverbird Cinema, do so for window shopping and excursions, which does not translate to sales.

Specifically, checks showed that while majority of visitors to Shoprite store inside ICM go there to buy one or two loaves of bread because of its quality and lower prices, a large percentage of visitors to the mall, which is about 50 percent, purposely visit the Silverbird Cinema, which is noted for showing latest films in Nigeria.

Meanwhile, the operator of the Shoprite franchise in Nigeria, Retail Supermarkets Nigeria Limited (RSNL), has admitted to facing challenges in its operations.

It, however, assured Nigerians that it’s currently undertaking a comprehensive business model reset to align with local economic realities.

Former business model

“This model is no longer viable in the face of Nigeria’s current economic climate, which includes exchange rate volatility, rising inflation, and constrained liquidity,” the company explained in a statement made available to BH at the weekend.

According to the company, the new business model was designed to become less dependent on imported products.

The new model, it added, is built on several key pillars, especially the sourcing of over 80% of its products locally.

“Yes, it has been a tough period, but this is not a collapse; it is a reset. The old model did not work for Nigeria. With new investors behind us, we are rebuilding Shoprite to be more local, culturally relevant, more affordable, and more resilient.

“We are coming back bigger and stronger to serve Nigerian customers better than ever before”, Shoprite Nigeria’s Chief Strategy Officer, Bunmi Adeleye, assured.

How strategic errors, fierce competition humbled retail goods giant-WPS Office.docx