Dedicated retail space is changing consumer habits in Morocco

Although it continues to be dominated by informal trade and business, the Moroccan retail sector has been in continual evolution over the past couple of years, with the ongoing influx of foreign brands and franchises coinciding with public and private investment in dedicated retail spaces.

In a bid to restructure the Moroccan retail sector and modernise distribution and supply chains, in 2007 the Ministry of Trade, Industry and New Technologies introduced the Rawaj Vision 2020. By 2020 the strategy is aiming to bolster the sector’s contribution to GDP from its current 11% to 15%, generate 450,000 new jobs and oversee the development of 600 supermarkets and hypermarkets, as well as develop 15 malls and 15 outlet stores.

Demographic and socio-economic trends bode well for the sector’s future: consumer habits are changing and consumption is rising. “Consumption habits have considerably evolved in Morocco, with the advent of new shopping facilities like malls and supermarkets,” Malik El Harim, general-director of Rabat’s Mega Mall, told OBG.

Consumer Confidence

According to a survey by the National Observatory of Human Development conducted in 2012 and released in 2015, annual per capita spending increased by more than 50% between 2000 and 2012, rising from Dh8280 (€900.86) to Dh19267 (€2096.25). Monthly spending per household increased from Dh4111 (€447.28) to Dh6166 (€670.86), of which Dh2125 (€231.20) was spent on food, Dh1552 (€168.86) on housing and energy costs, Dh667 (€72.57) on hygiene and medical care, Dh499 (€54.29) on clothing, Dh458 (€49.83) on transport and communication, Dh402 (€43.74) on education and leisure activities, and Dh135 (€14.69) on furniture and homewares.

Although household consumption has improved overall, it has been on a decelerating trend in recent years, a fact attributable to the global economic slowdown. The household purchasing power growth rate dropped from an average of 3% between 2008 and 2010 to 2% between 2011 and 2014, according to figures from the High Planning Commission (Haut Commissariat au Plan, HCP). Household consumption grew 3% in 2014, down from 3.7% in 2013, on the back of declining rural household revenues. Figures from Bank Al Maghrib point to a year-on-year (y-o-y) increase of 9.2% in consumer loans in December 2014, reaching Dh44.08bn (€4.8bn).

Demand indicators from early 2015 seem to confirm returning confidence. “Although 2013 and 2014 were relatively weak years in terms of retail performance, we have already seen some encouraging signs at the beginning of 2015 in terms of demand,” Sami Grouz, general manager of Groupe Petra, told OBG. Groupe Petra is the leading holding in the retail space, with 120,000 sq metres of commercial property under management and a mall in development.

Informal Market

Informal activities continue to dominate the Moroccan retail and distribution sector, particularly in the smaller towns and remote areas of the country. It is estimated that 85% of retail business is carried out by operators in the traditional small-scale and informal sector. For instance, the number of souqs – small-scale markets where goods of all kinds are traded – in Morocco is estimated at more than 900. Omar Raji, CEO of Raji Frères, a company specialised in importing and selling food goods including spices, legumes, dried fruit and green tea, told OBG that decreased purchasing power in recent years has seen consumers return to markets to buy their goods, particularly food, in the quantities desired and for prices that are cheaper than those of the packaged goods on offer in supermarkets.

Smuggling

Furthermore, some evidence would suggest that cheaper prices are often a result of goods smuggled into the country. Raji believes his company’s turnover had fallen by 70% over the past three years due to fierce competition stemming from smuggled goods. “If we take the example of black pepper, 300 tonnes are officially declared and yet Morocco, which does not produce the spice, consumes around 7000 tonnes a year,” Raji told OBG.

Change Afoot

Nonetheless, the emergence of dedicated modern retail space at facilities like Morocco Mall and the arrival of international brands such as IKEA and Bim are having a considerable impact on consumption habits. “Consumption habits are evolving significantly. Unlike a few years ago, households are increasingly becoming accustomed to modern retail and distribution networks,” Riad Laissaoui, general-director of Label’Vie, told OBG. “Moreover, the advent of discount markets in the food segment, for instance, is gradually allowing retailers to address broader segments of the population,” he added.

The development of modern retail networks is gradually influencing the way trade is carried out in the informal sector. “Modern distribution has helped organise and restructure the various segments that make up the sector. Products such as frozen food and charcuterie, for instance, did not exist prior to the arrival of these networks,” Laissaoui told OBG. “There has been a rush in the informal sector to introduce quality norms and standards in the face of rising competition from modern distribution.”

Supermarkets

Modern food stores occupy just 15% of the formal food distribution segment, although the Rawaj Vision targets a goal of 30% by 2020. The yearly increase in store numbers witnessed recently bodes well for the segment’s future.

In 2014 alone, some 74 stores opened, bringing the sector’s total number of stores to 372 up from 298 in 2013. With 72 stores, Marjane, operating under the brands Marjane, Acima and Electroplanet, represents the sector’s biggest player, with a 44% market share, according to Euromonitor International. Three Marjane hypermarkets were inaugurated in 2014, in Casablanca, Inzegane and Guelmim. The group has unveiled plans to expand internationally, starting with Côte d’Ivoire, Senegal and Tunisia.

The company has also taken a first step to diversifying its distribution network with its first discount store, Xpress Market, opening in Casablanca in 2014. The business model of Xpress Market is expected to differ from its existing super- and hypermarkets and resemble that of the Turkish discounter Bim, who also operates in Morocco, setting up shop in populous areas and offering a range of products at discounted rates. The first four stores have been opened in Casablanca, in the neighbourhoods of Val Fleury, Gauthier, Bourgogne and Oulfa.

Another major player in the sector is Label’Vie, with a market share of approximately 30%. The firm, which partnered with French brand Carrefour in 2009, opened eight supermarkets in 2014, bringing its total number of stores to 62 and expanding its presence to 22 cities and towns. The chain operates under different brand names – Carrefour Hypermarket, Carrefour Market, Atacadao and Carrefour Express – and is planning to invest Dh1.6bn (€174.1m) between 2014 and 2016 as part of its strategy to expand nationwide. In 2015 further openings are expected in both Larache and Tetouan.

Bim first came to Morocco in 2009 and occupies 6.5% of the market share, according to La Vie Éco. In 2014, the Turkish discount supermarket chain opened 59 new stores, bringing its total number to 223, up from 44 in 2010. The Turkish chain intends to bring its number of stores to 500 by the end of 2015.

Lastly, Aswak Assalam, a subsidiary of Yanna Holding of the Groupe Chaabi, operates a total of 12 hypermarkets and holds a market share of 9.5%. The chain, which had previously halted its expansion plans since 2010, now says it has plans to open four new supermarkets in the coming years.

In line with the global trend towards offering in-house products, the firm unveiled its own proprietary brand, Janis, in mid-2015. Some 20 different products are currently marketed under the Janis brand at prices 10-30% cheaper than other branded goods on sale in the company’s 12 hypermarkets. According to reports in local media, 70% of the brand’s goods are imported from countries like Portugal, Spain and Turkey and the remaining 30% are locally sourced. The company aims to bring the number of its Janis branded products to 100 by end-2015.

Shopping Mall Expansion

Morocco has fewer than 10 malls in total but new developments – particularly along the Rabat-Casablanca-Tangiers axis – are expected to increase numbers over the coming years. “We’re still at the take-off point for now in Morocco but the signs are positive,” Yassir Ameziane, director of malls for Groupe Petra, told OBG. “There is interest on behalf of consumers, notably families for whom malls constitute a leisure and shopping destination, but also public authorities who view mall development as a way to structure trade, and investors for the long-term prospects these projects have to offer,” he added.

In 2014 the most popular malls were Casablanca’s Morocco Mall, Fez’s Borj Fez, and Marrakech’s Almazar and Carré Eden, registering total visitor numbers of 17m, 6m, 5m and 3m, respectively. Morocco Mall was inaugurated in 2011 and built at a cost of Dh2bn (€756.8m), covering 70,000 sq metres of gross leasable area (GLA). The mall has a number of high street and luxury brands, including Zara, Massimo Dutti, Gucci and Louis Vuitton. Almazar was launched in 2010, has a GLA of 40,000 sq metres and contains 100 stores. Carré Eden was launched in 2014, has a GLA of 15,000 sq metres and contains 60 stores, including H&M and Lacoste.

Capacity Growth

A number of new malls are already in the pipeline. Among these is Zenata shopping centre, which is currently being developed as part of a joint venture between Portuguese Sonae Sierra, Dubai-based Al Futtaim, local holding Marjane and Société d’Aménagement de Zenata (Groupe CDG) in Mohammedia, Casablanca, for a total investment of €100m. With up to 250 shops, the mall will have the country’s first IKEA as an anchor, expected to open by the end of 2015. The rest of the leasable area is expected to open in 2017, and include a Marjane hypermarket, a 10,000-sq-metre leisure and fun area, and a cinema complex.

In Rabat, Moroccan mall and retail developer Groupe Aksal signed an agreement with Wessal Capital to construct a shopping mall as part of a broader plan called Wessal Bouregreg, launched in 2014 to develop mixed-use and tourist projects in the Moroccan capital. Mall de Rabat will be developed over 6 ha of land and will host more than 200 brands, along with entertainment facilities and a hotel. The project is expected to generate over 3000 jobs.

Costing Dh1.5bn (€567.6m) and opened in June 2015, the three-storey, 42,000-sq-metre Menara Mall complex has a hotel, stores and a Marrakech-inspired bazaar with 44 boutiques, as well as a theme park and entertainment area for young children.

Clothing & Ready-To-Wear

The expansion in dedicated retail space such as shopping malls has allowed for a proliferation in the number of brands in the market, particularly in the clothing and readyto-wear segments. The steadily increasing number of foreign franchises during the past 20 years has been a direct result of the development of modern retailing in Morocco, with the number from all sectors combined rising from just a dozen in 1990 to around 650 in 2013. New franchises continue to arrive, with French women’s clothing brand Fashion Bel Air among the latest additions, opening its first store in Casablanca in April 2015.

To retain their market advantage, established companies are also looking to expand their presence in the kingdom. Turkish store LC Waikiki, for instance, has plans to invest Dh44m (€4.79m) in developing its presence over the next couple of years. The brand currently operates three stores in Morocco and is planning to inaugurate its fourth store in Tangiers.

The expansion of dedicated formal retail space has also provided local operators with opportunities to further develop and structure their activities. Marwa, a women’s clothing store established in 2003, is among Morocco’s most popular local brands. A made-in-Morocco success story, Marwa operates over 60 stores at home but also has stores in Spain, France, Saudi Arabia, and more recently, Bahrain.

Established in 2002, Morocco’s Diamantine, a traditional clothier, operates around 80 stores locally and 20 stores in Algeria, and planning to open another 20 in the Gulf by end-2015. While the number of established local brands remains limited, future prospects bode well for the market as the middle class expands and consumption habits evolve.

E-Commerce

Retail segments are also expected to expand with the advent of online shopping, and websites like Jumia are testament to this expansion. Launched in 2012 with some 20 employees, Jumia was conceived by Africa Internet Group, a subsidiary of German-based Rocket Internet, as an e-commerce mall. Today, the company employs approximately 200 people and is Morocco’s largest online mall. The website offers a wide array of goods ranging from clothing and beauty products to electronic goods and household appliances, among others.

It is not difficult to see why the retailer has done well in Morocco. With over 16m internet users in the country, e-commerce is increasingly gaining traction in Morocco, registering double-digit growth in recent years. In 2014, the number of transactions registered with the Centre Monétique Interbancaire (CMI), the country’s main online payment platform, reached 2.01m, totalling Dh1.2bn (€130.56m).

Online transaction volumes using Moroccan credit cards increased y-o-y by 16%, accounting for 96.5% of total transactions, while their value saw a 14.9% increase, representing 88.4% of total payments. The increase can be explained by a number of factors, such as the rise in internet use, higher banking penetration rates, and the growth of e-commerce.

Among the latest newcomers is “Made in Morocco”, an e-commerce platform launched in January 2015 by Morocco’s National E-commerce Federation. Bringing together around 200 Moroccan producers, the website has almost 80,000 entirely made-in-Morocco products on offer, spanning a broad range from food to books, artwork, music, cosmetics, electronic devices and jewellery.

Nonetheless, the sector still has a number of challenges to overcome if it is to consolidate growth, such as ensuring secure payments, limiting fraud, enforcing and protecting consumer privacy and promoting exports. In a recent report released by the UN Conference on Trade and Development that measured the ease of carrying out online transactions during 2014, Morocco was ranked 75th of 130 countries evaluated. Morocco figured among the top 10 African countries, coming in fifth position behind Tunisia, Egypt, South Africa and Mauritius.

Furniture & Homewares

The two main Moroccan brands operating within the furniture and homeware segment are Kitea and Mobilia, with Spain’s Mi Casa the most recent international arrival. The segment’s largest player, however, is yet to arrive. Swedish furniture and interiors giant IKEA is set to open its first outlet in the coming year, and completed its first wave of recruitment in May 2015, hiring 360 staff.

Its first anchor location is located in Zenata, between Mohammedia and Casablanca. Measuring some 26,000 sq metres and costing Dh500m (€544,000), it is expected to employ 400 people directly and contribute a further 1000 jobs indirectly. It closely follows the arrival of Mi Casa, which opened its first store in Casablanca in 2015. Already present in France, the Spanish retailer has expansion plans for the UK, Belgium and Italy.

In light of international competition, both Kitea and Mobilia have taken steps to consolidate their market share. In early 2015, Kitea signed a franchise partnership with Belgium’s Casa to open three stores in Casablanca, Rabat and Marrakech in 2015. Casa’s goods will also be on offer within two of Kitea’s stores in Bouskoura and Rabat. Local media report that Mobilia plans to open four new stores in 2015 – in Tangiers, Salé, Fez and Agadir.

Electronic Goods

The market for electronic goods is dominated by foreign giants such as LG, Sony and Panasonic. The smartphone and tablet segment is rapidly growing and in 2014, 38.2% of mobile phone owners in Morocco possessed a smartphone, according to figures from the National Agency for Telecommunications Regulation, up 15.7% on 2013. At the high end of the model range, there was a strong increase in sales of phablets – up by 650%, compared to the results for 2013. Phablets are now responsible for 4% of the total market value.

Noting the segment’s rising popularity, local developers have looked to tap into the market. In 2013, Moroccan Disway, a distributor of electronic goods, launched its own smartphones and tablets under the brand Yooz, grabbing 12% of the market to be the third most-popular brand after Samsung and Apple.

In the television segment, overall sales registered a 5% increase in 2014, rising to 438,000 from 417,600 in 2013. Television ownership has matured considerably in Morocco. As of 2011, 85.6% of rural households possessed a television, while the figure stood at 96.8% in urban areas. While the number of units sold has maintained a positive growth trend over the past few years, turnover has witnessed a slight decline, falling from Dh1.84bn (€200.19m) in 2013 to Dh1.82bn (€198.02m) in 2014, as the rise of internet viewing drives down prices. LCD televisions accounted for 94% of sold units in 2014. Sales of plasma screens also increased, rising 11% y-o-y, with around 25,200 sold units in 2014.

Challenges

The ongoing expansion of modern retailing across Morocco brings with it a number of challenges. While mall development projects are currently thriving, attention needs to be directed towards ensuring the profitability of these centres. At present, rental costs within malls are the same for all operators regardless of their activity.

According to Malik El Harim, general-director of Rabat’s Mega Mall, variable costs applied to retailers in line with their activity could have a significant impact on profitability and help reduce unpaid rent. But this requires further transparency in the turnovers realised by retailers and passed on to the mall’s administration. “It’s on the basis of this turnover and the conditions set by the administration that rent costs should be calculated,” El Harim told OBG.

A shortage in retail space and land is also likely to pose challenges for future developments. “Shopping centres need to be established in a structured environment. Access, transportation, security and lighting, for instance, are among the many prerequisites which need to be integrated into shopping malls and which should be provided by the city and not the investor,” Ameziane told OBG.

Outlook

The establishment of dedicated retail space over the past decade, backed by the goals set under the Rawaj Vision 2020 to structure and organise the sector, have played a major role in shaping modern retailing in Morocco today, at the same time as driving an evolution in consumer habits. With more projects in the pipeline, formal retail activity is set to see its share increase over the coming years.

In terms of foreign brand presence, Morocco is certainly ahead of many of its neighbours, notably Algeria and Tunisia, allowing for a broader range of goods to be found on its local market while also stimulating competition and innovation among retailers. “The advent of foreign brands has had a positive impact, introducing more organisation, added value and know-how into the Moroccan market,” Morocco Mall’s El Harim told OBG.

Despite impressive progress, informal activity continues to form the bulk of the sector today. While the Rawaj Vision 2020 declares it as one of its aims to restructure and gradually absorb informal activity into the formal economy, more concerted efforts will be required to accelerate the rate of change.