Ramesh Sadhwani, Joint Managing Director, Melcom Group: Interview

Interview: Ramesh Sadhwani

What opportunities do Ghanaian retail companies have for expansion in the region?

RAMESH SADHWANI: There is room for retail expansion both at home and across West Africa. Nigeria, Ghana and Côte d’Ivoire are the leaders in modern retail, but other markets in the region still have some way to go. Companies that established themselves in larger markets therefore have the opportunity to grow outside their borders.

The African Continental Free Trade Agreement (AfCFTA) should further enable this expansion. For example, many large multinationals have manufacturing bases in more developed African markets. Ghanaian electronics retailers import these products, but the costs are high because of tariff and non-tariff barriers. The proper implementation of the AfCFTA will increase competition, and as such importers will see prices fall. However, considering the challenges associated with the rapid implementation of the agreement, retailers are not yet incorporating it into their strategies.

Increased levels of trade remain impeded by infrastructure. The cost of transporting cargo from Tema to the northern regions is sometimes higher than that shipping cargo from China to Tema. The infrastructure gap is being addressed to some extent by projects including the Tema port expansion, which will enable the use of larger and more frequent vessels and the development of railways. It remains to be seen, however, whether this will translate into lower charges and a significant decrease in clearing times.

Which strategies are retail players using to retain existing customers and attract new ones?

SADHWANI: Many companies are turning to discounts to attract customers in an increasingly competitive market, but this is squeezing margins. Efficiency and economies of scale are becoming more important, leading some players with limited capacity to turn to outsourcing for warehousing, logistics and distribution. Only the larger retailers have the ability to centralise these operations. Indeed, we are expanding our warehousing with an additional site in the Tema Port Free Zone. Some retailers are specialising their offerings, with supermarkets focusing on ready-made food, baked goods, butchery or high-end cuisine. Players are also mining for customers that have not yet been drawn to formalised retail. Stores that are able to provide a more pleasant and convenient shopping experience at prices as close as possible to traditional markets are increasingly attracting people from neighbourhood and non-formal shops. Whereas consumers previously prioritised convenience, today they are beginning to move towards shopping less often and in greater quantities, which draws them to organised retail.

Driven in part by the success of mobile money, e-commerce is picking up and is creating another revenue stream for brick-and-mortar stores that have the capacity to incorporate it into their strategies. E-commerce in Ghana has long been held back by a lack of trust, so we expect consumers will continue to use it as a digital catalogue to browse items before retrieving them in person from the nearest store. As such, e-commerce is not a threat to traditional retailers, but instead offers a venue to those with the most advanced logistics networks and the largest store footprint to expand.

How successful have retailers been in increasing domestically sourced products?

SADHWANI: The number of locally sourced products has increased in recent years, and this is expected to continue. Categories with high-quality local products include food and beverages, plastics and aluminium. Within food and beverages, the players that use local inputs are primarily multinational, but medium-sized businesses have recently started producing affordable, high-quality products in export-quality packaging. There is significant potential for locally sourced fruit and vegetables to become available in supermarkets, but this will first require an increase in quality standards.