Africa’s consumer-facing industries are expected to grow by $400 billion by 2020, representing the continent’s largest business opportunity.
But many companies don’t know how to translate this potential into action, due to a dearth of market research. But that is changing. In one of the first studies of its kind, McKinsey’s Africa Consumer Insights Center surveyed 13,000 consumers in ten African countries, with a focus on the largest cities. Five categories of consumption were covered: apparel, financial services, grocery, the Internet and telecommunications.
As consumers, Africans are similar to urban consumers anywhere else in the world: they are both brand and quality conscious, they seek out the latest trends but watch their budget, and they want a modern, attractive shopping environment.
But Africa is a complex, nuanced market of 53 countries and more than 2000 dialects. Consumers in the north have very different preferences and needs than those of the sub-Saharan countries.
The McKinsey study attempts to provide companies, whether new to the continent or expanding an existing footprint, with the insights they need to formulate a winning business model to reach this new consuming class. Here are some highlights:
Focus where it matters
Cities offer the best opportunity: urban Africa is forecast to contribute nearly 40 percent of GDP growth. But companies may be wise to bypass high-profile megacities, such as Cairo, Johannesburg, and Lagos, for mid-tier cities, like Abidjan and Rabat, which are more accessible, have less competition, and offer better profit margins.
Develop locally relevant, quality products
Companies can better tailor products to local markets if they understand what quality means for African customers and know their preferences, lifestyles, and daily needs.
Hit the right price point
Since affordability is critical, companies may have to reengineer products to hit a specific price point. The necessary moves may include offering lower-cost versions, smaller sizes, or alternative payment models.