Trade in Africa is still in the very early stages of development. The numerous traditional trade outlets (e.g. dukas) remain the biggest segment of the market. Moving goods to this large, fragmented base is difficult and costly. Smaller stores have limited cash flow and stock space resulting in the need for an intermediary such as a wholesaler to break bulk deliveries into more manageable quantities.
Understanding the Problem of Fragmented Markets
For managers setting up a route-to-market system, it is important to know how products flow into the market. The wholesale structure can assist marketers, but can be a barrier to doing business for brand owners.
Wholesalers are motivated by prices and deals, thus are not ideal as an exclusive long-term strategy. Brand owners can provide additional whole sale support and account development to help create demand.
As African markets become more attractive, companies are moving away from trading and are adopting a more organised route-to-market making use of distributors.
Understanding the Congestion Problem
Most African cities suffer from congested roads, and retail outlets are located in densely populated areas. Thus alternative distribution strategies such as micro distribution are needed to reach certain areas.
Being able to see what is going on in the supply chain via technology remains a big challenge. Cost of installing hardware is high, thus mid-tech solutions such as mobile phones are being explored.
Understanding the Base of Traditional Outlets
The focus will remain on reaching a large base of traditional outlets and thus identifying third party logistics (3PLs) partners who understand the regulations and have the necessary relationship networks is vital.
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This is an extract taken from our full Reaching your Customer Base in Fragmented Markets guide.
Many thanks to Supply Chain Lab for contributing this guide.