What Global Brands Must Learn About the Nigerian Consumer

In 2020, ShopRite, the South African retail giant, headlined when the company left Nigeria 15 years after operating in the country. ShopRite had reached a high of approximately 25 stores throughout Nigeria, and more than 2,000 Nigerians had been employed by the company when it was at its height, and had become synonymous with modern shopping, aired aisles, imported products, and the sensation that people get when shopping during the weekend. But, notwithstanding all these trappings, the bottom line was risky. It was losing revenues, its operating expenses had been skyrocketing; imported products were scarce; inflation and currency devaluation were devastating blows. Finally, the parent company, with its headquarters in South Africa, decided to sell all of its operations in Nigeria to a local investor (Ketron Investment Limited). Although ShopRite is still in Nigeria, the model is being redefined.

It is not just a tale of disappointment. It is a tale of how even market leaders have to evolve or bow out, not out of a lack of strength, but in many cases, as a strategic move. Based on the case of ShopRite Nigeria, this paper shall discuss the reasons why large international business models may fail in such turbulent conditions as those in Nigeria, how localization and adaptation may make or break the success and what the global multinational companies (and even local companies) may learn.

 

Background: What Went Wrong for ShopRite in Nigeria

ShopRite Nigeria had some of the following pressures that accumulated in the background:

1. Increased operating expenses: Power (generators, fuel), importation of goods (shipping, tariffs), and maintenance of infrastructure swelled costs.

2. Currency devaluation and inflation: The fall in value of the naira saw the cost of imports skyrocket, leaving margins. The cost of sales and forex losses increased due to the devaluation of consumer goods companies in Nigeria (See how Nigerian consumer goods firms experienced the increased cost of sales and forex losses associated with devaluation).

3. The buying power of consumers reduces: Inflation and devaluation imply that many Nigerians have less disposable income; the demand for imported or high-quality products decreased.

4. Mismatch between foreign model and local culture/economy: ShopRite applied big format hypermarkets, fixed prices, mixes of imported products, and buying in large quantities, which would have conflicted with the Nigerian consumer culture (shopping in smaller units, enjoyment of freshness and local products, bargaining, etc.).

 

Major Lessons to the Nigerian Ecosystem and International Business.

What can companies working (or intending to work) in such an environment as Nigeria learn from the experience of ShopRite? These are some of the lessons which are applicable in the local and international context.

1. Growth ≠ Just Expansion. Growth = Fit + Flexibility

Being a big company with a high number of shops or a big footprint does not ensure sustainability. The fit to the local context of the business model is of more importance, and the ability to pivot in circumstances where assumptions (cost, currency, consumer behaviour) are no longer true.

During volatile economic times, inflexibility is fatal. A company able to change its pricing, product mix, purchase and supply chain within a short time is in a better position.

 

2. Localization is a Non-Negotiable

- Local sourcing: Decreasing the reliance on imports through sourcing locally assists in the hedging of foreign exchange fluctuations and disruption in the supply chain. The CFOs of most firms in Nigeria are trying to enhance the local input materials or more exports as hedges.

- Cultural adaptation: The local standards of shopping frequency, the size of the package to buy (the sachet economy), taste, belief in the freshness or locally made items. International companies that do not respect culture do it at their own risk.

- Regulatory/environmental fit: It is better to know about the local regulations, taxation, and infrastructure restrictions (power, roads), and political risk.

 

3. Financial Strategy & Currency Risk

- The devaluation of the currency would make the profits negative overnight. This resulted in massive FX losses and increased finance costs for many companies in Nigeria.

- Hedging (where applicable), structuring of a contract such that risks are shared, pricing can vary, or localized inputs which result in lower exposure.

- Diversifying sources of revenue: exports or developing products based on stable currencies (when the companies are capable of that), or services that are less susceptible to imports.

 

4. Exiting Isn’t Always Failure

Strategic resets can be exits. In the case of ShopRite, selling foreign ownership and retaining the brand, starting over with local ownership, and reinventing procurement and operations are options that can allow preserving value and capacity to emerge stronger.

There are occasions when it is better to walk away than to remain in an unprofitable scale and use the resources.

 

5. Agility & Scenario Planning

Fluctuating macro-economic environments (currency fluctuations, inflation, new regulations) require scenario planning: What would happen should inflation were twice? What would happen if foreign exchange access is limited?

Those firms that can respond (e.g. alter supply chains, renegotiate leases, alter product lines) benefit.

 

Nigeria as Compared to the World: How it is Mirrored

Although the story of ShopRite is Nigerian, most of the pressures are global, particularly in the emerging/developing markets:

- Currency risks, inflation, and reliance on imports also apply to Latin America, some parts of Asia; global corporations in such regions tend to prosper when they can learn how to localize and hedge their money.

- Shocks in the global supply chain (e.g. in COVID-19) were a demonstration of the vulnerability of import-based models when faced with a disruption in shipping, tariffs, or foreign exchange.

The world is changing its consumer demands: there is a growing demand towards being affordable, trustworthy, local and authentic, and sustainable. Only specific segments can be served by imported or, rather, premium models.

 

How ShopRite Nigeria is Resetting and What Can Work Going Forward

According to the recent reports, ShopRite Nigeria, under new ownership, is doing some of the right things. Key moves include:

- Enhancing local supply chains: Procurement of products over 80 per cent locally. This stabilises the cost, as well as creates goodwill with the local producers.

- Affordable and resilient rebuilding: Modifying product mixes, pricing, potentially small-store, potentially smaller and more responsive to local demand formats.

- Stressing cultural relevance: The Nigerian customer wants to know what is truly important to him (freshness, local brands, trustworthy produce, value for money, reliability).

These changes are in harmony with what most observers view as what FMCG (Fast Moving Consumer Goods) companies in Nigeria need to do: abandon imported inputs, localise sourcing, customise packaging, and currency risk management.

 

Broader Implications for Global Businesses Operating in Emerging Markets

These are the global best practices to internalize in case you are a multinational planning entry into markets such as Nigeria, or in case you are also a local business going global: 

Practice	Why It Matters	How to Do It
Localization of supply & product	Reduces exposure to FX risk and builds local loyalty	Partner with local suppliers; develop product variants suited to local tastes; use smaller packaging units
Flexible financial & risk management	Helps absorb macro volatility	Use hedging; price contracts in safer currencies; keep cost structure adaptable; maintain reserves
Consumer insights & cultural strategy	Builds relevance and trust among customers	Do qualitative research; adjust store format, branding, promotion to local culture; empower local teams
Agility in operations	Because policy, regulation, inflation, etc., change fast	Scenario planning; modular store formats; diversified sourcing; readiness to pivot models
Pragmatic growth	It’s better to grow deep than wide	Focus on profitable segments; avoid building huge scale if it costs more than it returns; exit or reorganise when needed

 

Conclusion

The experience of ShopRite in Nigeria is not merely a tale of an out-of-market retailer, but a series of cautionary tales and practical lessons for businesses worldwide in unstable settings, particularly for those operating in Africa and other emerging economies. The factors that ShopRite had to contend with include currency devaluation, inflation, high operating costs, and not aligning with the local culture, which are not exclusive to the company. It is the reaction of the businesses: do they want to impose some foreign model, or to adapt, localise, reset?

In the case of Nigeria, in particular, we are observing that localization, supply chain resilience, financial strategy and cultural fit are not arbitrary but core. The new reset of ShopRite under Nigerian ownership is a live case study of how a business can learn, retrench where necessary, re-adjust to the realities of the local area, and yet have the potential to succeed.

All companies venturing into emerging markets in the world are advised to incorporate adaptation capacity, cultural intelligence, and financial hedging during their initial stages. And also very vital- be prepared to leave or transition when the model you are in now cannot be maintained. Since occasionally, wise retreating is the preliminary to a far more powerful attack.