Distribution Networks

By on October 23, 2015
Smartown

Distribution NetworksOur research revealed that women buy beauty products from pharmacies and beauty shops for the most part. One of East Africa’s largest department store chain Nakumatt has created independent beauty departments, that is a major go-to as well. Retails stores in shopping malls, street stores, free-standing mall carts are also popular buying spots for women in East Africa.

Importers are the biggest players in the foreign brands market in Africa. These guys bring in all kinds of cosmetic products from Europe, North America, the Middle East and Asia. In fact, Dubai (United Arab Emirates) has become a hotspot for African importers to make orders for cosmetic products from across the world.

Depending on the size of the order and the brands you choose, starting the import business will require significant capital and (maybe) an import license from the government. Wholesalers and retailers usually buy and stock products in different sizes. These products could be imported or manufactured locally.

Retailers of cosmetic products include open air markets, department stores, neighbourhood drug stores and pharmacies, beauty salons and barbershops and spas. These are essentially the places where ordinary people go to buy their beauty and personal care products. Depending on your location, marketing strategies and the competition, these can be very lucrative businesses you may want to explore.

Distribution in most of the markets in our study area is complicated and unstructured. The population within our study area is widely spread over the 5 countries, meaning logistical barriers are high. Just to put things in perspective it will be prudent to point out here that the size of Africa is larger than USA, China, India, Japan and Europe… combined!

As demand for cosmetics and beauty products rises in the these countries, formal retail trade channels are expanding across the entire region as a whole, especially via the big East African retailers who are providing international companies with a simplified route to the market by offering them effective distribution channels to reach the East African consumers.

Nakumatt, Uchumi, Tuskys, Ukwala and Naivas are leading Kenyan supermarket chains that serve the East African region – specially the Great lakes region. Nakumatt has nearly 50 stores in the African Great Lakes countries of Kenya, Uganda, Rwanda and Tanzania. It employs over 5,500, and has gross annual revenue in excess of US$450 million. It has plans to enter other African countries and to increase the number of stores in the countries where it already has a presence.

Uchumi, another leading supermarket chain and distribution outlet, maintains outlets in Kenya, Tanzania and Uganda, with a view to establish a presence in Burundi, Rwanda, and South Sudan in the next few years. These modern channels such the above mentioned hypermarkets, supermarkets and drugstores are seen as a guarantee of quality, a key
purchase factor for most African consumers.

The expansion has been encouraged by the conscious effort that governments in our study area are making to diversify their economies away from dependence on resources. However, on average only around 20% of stores can be qualified as “modern trade”.

The rest are called “traditional trade”: small stores like groceries and open-air markets remain the biggest sales platform, especially for basic products, such as hair care and soap. For countries with no modern trade, chemists, pharmacies and para-pharmacies are also a major retail player, as they represent a guarantee of quality and are very popular amongst middle and high income consumers. For higher-end products, spas and salons are also seen as a growing and viable distribution channel.

But those premium channels are still in infant stage, located in large cities, and mostly targeted towards rich Africans and expatriates within the five countries in our study area. In this challenging distribution environment, companies will clearly continue to operate with local distribution partnerships to mitigate potential risks. Personal care and beauty distributors enjoy a bright future in Africa.

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