Retail in Emerging Markets

Apr 06, 2018 No Comments by

In many regional environments, we are influenced by local dynamics that engage daily with the market. This daily interaction is often the benchmark to whether a product sells or not and the metric in these markets is exactly that, does it sell?

In the building materials industry, the best materials may not necessarily be the most successful, or profitable from a sales perspective. With growth forecasts showing that six out of the ten fastest growing economies globally emanate from the continent of Africa, it is no surprise to see the influx of materials from Europe and indeed the East starting to influence local markets.

Parallels can be drawn across different industries in emerging markets where the behaviour of the customer is very similar.

In a mature market, a premium is often placed on the advanced benefits and features of a product and how this will improve its performance. Such a market will be well regulated and enjoy material and industry “standards”.

In a developing market, the luxury of advanced benefits and features are secondary (albeit good to have) in comparison to the main driver, being price sensitivity.

To give an example between two different industries in emerging markets where one is able to draw similarities, let’s consider sports footwear and apparel with that of building materials.


The sportswear market in emerging countries is largely defined by a combination of culture, lifestyle, brand exposure, availability and cost. Emerging markets, certainly within Africa are very impressionable to brands and the culture that each brand represents. There exists a heightened awareness for ones individuality, driven by aspiration and this is largely amplified through lifestyle choices. Engaging with this market is underscored by being able to deliver on the customers’ expectations which is largely supported by product availability at “the right price”. Products are largely imported for the most part with a small percentage of locally made goods.

Cross reference this in the same environments with that of building materials. For the most part, materials are largely imported where local manufacturing either does not exist or is not of acceptable standard. The market thrives on availability of product as well as the culture of satisfying customers with the “best price”.

How does one create “value” in emerging markets when factors that generally influence the consumer are grounded in availability and price?

Both markets have enjoyed growth even though the drivers that affect them are very different. It is important to be able to differentiate between the two as you would not want to spend additional energy competing in a space that does not appreciate the value you offer.

From a product perspective, what drivers illustrate where value is on offer?

In a mature market, the competition is not simply based on price (an easy fall-back) but rather the characteristics of the product that differentiate it against its competition. The value of the product is based on its performance and how it will improve the customer’s overall experience. Nowadays, the performance benefits are also sold as part of a theme or trend, which allows the manufacturers to up-sell further materials as well increasing the transaction opportunity.

The value here lies in performance, where often a premium is paid in order to enjoy this level of performance. Mature markets are being measured in their approach to industry and their role and responsibilities that will ultimately distinguish them from less developed industries. The common theme here is not price sensitivity (even though this has a weighting), but more so the quality and performance of the products.

In a developing market almost the opposite exists. Where the opportunity to grow at a very fast rate is apparent, the sense of rapid remuneration and a (be-there-first) mentality is promoted. The early adopter here is the availability of products, “no lead times for me thank you!” This is often at the expense of integral and possibly “ethical” factors. The cost of the product remains dynamic, often due to importation. Price sensitivity in such markets begin to influence the scale of business to be enjoyed in these regions, where a product of “low to acceptable” quality enjoys the same platform of those materials that are manufactured for high performance. Features and benefits get replaced by economy of scale and discounting, in order for the local transaction to be processed. The value in this market is not primarily on quality or performance but rather availability, selection and cost. The DIY model exists from a spaza shop to distribution centre for local consumption.

To compete in markets where less emphasis is placed on the performance of a product, one would need to consider an economical yet reliable product offering but more importantly, the value associated with excellent logistical and supply chain flexibility. Transactions are conducted on what is available and not what incurs “a lead time”.

It is important to mention at this point that performance products are not lost in a developing market, but rather their ability to influence at an early stage lacks the platform required to “sell the value” of performance. Key to market entry is the level to influence and a push-pull strategy would do well here to enter with a medium tier offering, prior to pulling the market into a performance category.

“Selling features and benefits at a premium in a price sensitive market is not the wrong intent, but so often incorrectly executed…”

When competing in both types of market, mature or developing, ensure that a strategic approach is well covered for the region that is to be competed in. Understand the competitor and possibly what strengths they enjoy, as well as understanding where their weaknesses could be exposed. From a retail perspective, the ability to turnover volumes in support of both small and medium sized markets would see their growth sustain both the walk-in customer and the ever growing e-tailor.

In an industry where terms such as just-in-time exist, the ability of suppliers to serve a retail store for them to generate growth at consumer level, is the critical metric. So too is the value of each load on a truck that leaves for the retail store, wherever it may travel from. Logistics in South Africa and indeed in many African countries, is largely underpinned by road transport.

Opportunities for suppliers to service the stores with products “they do not manufacture”, now becomes an attractive asset to the store. Manufacturers in the past were largely responsible for this, however their core business remains the manufacturing of the product and not so much its route-to-market. Disruptors in this industry today are able to service the retail store as well and if not better than the manufacturers are able to. It does of course add cost, but with the convenience of just-in-time delivery – suppliers of this nature become a real asset to the store, especially where storage limitations exist.

Quality, whether manifested in a service or in the product itself, should always be the mark of excellence that one aspires to achieve. The opportunity in the retail sector now exists for a broader offering of quality to be displayed, whether through the manufacturer, or supplier of building materials (or sportswear!). The winners in the future will be those who are able to meet both their respective customers’ demands whilst remaining profitable throughout the transaction.



About the author

Brendan Lowen is a qualified Senior Architectural Technologist and Head of Business Development for a nationally renown building materials manufacturer and supplier. Local and Global materials are constantly scrutinised for their fit-for-purpose offering in South Africa, whilst undergoing a route-to-market analysis. He often acts as an intermediary when engaging with the professional, manufacturing and retail sectors and most notably, when a disconnect becomes present within this chain. He contributes media content to the architectural community, through established industry platforms as well as the Advanced-Building website as its Thought Leader.
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