The Rise of Supermarkets in Addis

Supermarkets are increasing in Ethiopia’s capital. According to the Addis Ababa Trade Bureau, 331 received licenses last fiscal year – that figure is up from 175 four years prior. Market watchers say this trend makes sense, given that changes in the lifestyles of city dwellers prompts them to demand the convenience and reliability that supermarkets provide. But, as EBR’s Tamirat Astatkie reports, there may be added benefits to the proliferation of retail supermarkets in Addis Ababa.

Girma Hailegiorgis, 44, is married and has two children. He is a heavy truck driver and earns a monthly net salary of ETB15,000. Together with his wife’s income, they’re able to lead a comfortable life. EBR met Girma at Shoa Supermarket located around Megenaga in the Yeka District. He says he frequents supermarkets due, in part, to his busy lifestyle. “Unlike the past, I often shop at the supermarket for the sake of finding quality items, the availability of multiple choices and to save time,” Girma told EBR.
It is not only high-earning consumers like Girma that visit supermarkets. Tigist Desalegn, 32, a civil servant that works as the Research Project and Capacity Building Officer for the Bole District, earning a monthly gross salary of ETB3,909, also shops at these establishments. “I shop at supermarkets twice a month,” she says. “I buy chocolate bars, cosmetics, and sometimes other food items.”
Despite disparities in household incomes among Addis Ababa residents, the number of consumers who shop at supermarkets, like Girma and Tigist, has been increasing in recent years. Melaku Arega, Head Supervisor of Shoa Supermarket’s Megenagna branch, which is located on the first floor of Zefmesh Grand Mall, says the number of customers that visit this particular location has been increasing rapidly.
“On weekdays, around 3,500 customers shop in our supermarket on average, while during weekends and holidays, the number may rise up to 4,500 or even more,” he says. “This is much higher than the few hundred shoppers that visited this particular supermarket branch five years ago.”
Shoa Supermarket is among the pioneers in this sector, with a little more than half a century of service. It is also one of the biggest supermarkets in Addis Ababa, with nine outlets throughout the city.
Other chains have experienced similar success. Worku Tadesse, manager of the Friendship Supermarket in Bole, concurs with Melaku’s assessment about the dramatic change occurring in supermarket shopping. Located in the Friendship Complex on Africa Avenue, Friendship Supermarket was established 12 years ago and now has two branches. “Since its establishment, the number of customers of the supermarket has been increasing consistently, especially for the last four years,” he says. “On average, 1,800 and 2,500 customers shop at Friendship Supermarket on weekdays and weekends, respectively.”
The same goes for Safeway Supermarket, which is a relative newcomer, having opened in January 2012, with three branches: in CMC, Lebu and Bole. “The number of customers that use the CMC branch reaches, on average, 1,800 and 2,500 for weekdays and weekends, respectively,” says Esayas Anbesse, Finance Head of Safeway Supermarket’s CMC branch. “This figure was less than 500 a few years ago.”
Data obtained from the Addis Ababa Trade Bureau paints a clear picture about the increasing number of supermarkets. For instance, the number of supermarkets that received licenses stood at 175 four years ago. However this number jumped to 331 last fiscal year, demonstrating a 22.3Pct annual increment, on average. This figure does not include the number of branches each supermarket has.
According to a report by international consulting firm Deloitte, the rise in popularity of supermarkets across Africa is linked to larger economic trends. Specifically, newer socioeconomic groups are beginning to shop at these establishments. “The popularity of retail supermarket chains continues to rise among
 low- and middle-income consumers.… As the African economy continues to improve and expand, it is likely that groceries will be a key driver of industry growth across the continent’s retailing industry.”
Despite this growth and promise, however, Ethiopia has a long way to go when compared with East African countries like Kenya and Uganda. For instance, Kenyan supermarket chains, including Nakumatt and Uchumi, have built up strong networks not only in Kenya but in Uganda and Rwanda as well.
As of December 2015, Nakumatt had nearly 65 stores throughout East Africa and gross annual revenue of USD450 million. Another chain, Uchumi, which was established 40 years ago, has 27 branches in Kenya.

The Driving Forces
Acknowledging the changes in the shopping habits of city dwellers, some industry insiders have their own perspective about why it’s happening. “Based on my daily observation, the change in the lifestyle brings dynamism in supermarket shopping,” Melaku argues. This change is fuelled, in part, by the rise of consumers who earn disposable income.
Esayas says the marketing strategy of some supermarkets has also contributed to this change. “Even though we only recently joined the supermarket sector, Safeway is proud of the dynamism it has brought to the market in terms of changing people’s perceptions that supermarket shopping is merely for the upper class of the society,” he says.
To that end, the management of Safeway has strived to change the culture of shopping in the country by adapting international practices. “Some of the changes, inter alia, Safeway has brought to supermarket shopping include: Issuing membership cards to customers depending on shopping frequency and purchase volume over a period of one year,” says Esayas. “The card has three levels – Gold, Silver and Copper – and depending on their level, they enjoy up to a 20Pct discount on items they purchase. Other benefits include fast food and juice, a salad bar, a kids centre, and home delivery for select customers.”
Shoppers like Tisegaye Gobena have their own perspective on the shift towards supermarket shopping. For Tisegaye, 29, who is single and works at the Ministry of Agriculture, it is the nature of trade that pushes him to purchase from supermarkets. He usually shops at a supermarket once a month for toiletries such as toothpaste, soap and food items like cookies. “For me, the driving force to visit supermarkets are the fixed prices,” he told EBR. “I don’t like price bargaining with shopkeepers.”
Ezana Amdework, a lecturer in the Department of Sociology at Addis Ababa University (AAU), argues the dynamism of people’s lifestyles in Addis Ababa brings change to the landscape of the supermarket customers. “It’s obvious that Addis Ababa is home to the poor, the emerging middle class and the affluent who engage in conspicuous consumption and extravagant spending,” he states. “Excluding the two extremes, which are the poor and the affluent, the middle class is emerging and broadening its base.”
To illustrate this point, Ezana mentions the rapid development of residential houses and apartments that are located all the way from Megenagna to Ayat. “They belong to either to the emerging middle class or beyond,” Ezana argues. “Such houses are seen in different parts of the city.”
According to him, the factors that draw customers to shop at supermarkets in Addis Ababa are necessity, capability and convenience. “First, the increase in the number of middle class people in the city leads them to purchase items with a plan and in bulk. Planning refers to the frequency of shopping, which can be bi-weekly, weekly, twice a month, or monthly. Purchasing in bulk refers to the quantity as opposed to buying items for daily consumption,” Ezana explains. “There is also a change in the nature of work and time management of this section of the society that necessitate this to happen.”
Next, according to Ezana, is capability, which refers to the change in the housing conditions as well as storage (e.g. having a refrigerator), which enables consumers to buy and keep the items for a longer period. The third reason is convenience, since supermarkets allow for ‘one-stop shopping’ – the availability of most items in the same place – which saves time, as this section of the society may not have the ability to wander around open markets looking for certain goods or engage in extensive price bargaining.
Economists categorise the definition of middle class into two broad groups: relative and absolute terms. In 2011, a team of experts at the African Development Bank Group (AfDB) produced a seminal paper on Africa’s middle class entitled ‘The Middle Pyramid: Dynamics of the Middle Class in Africa’. The report rested on an absolutist definition of the middle class, defining the group as those with a daily of consumption between USD2-20 (in 2005 purchasing power parity with the US dollar).
Of course, the past decade of unparalleled growth has changed perceptions about many African countries for the better. Seven of the world’s ten fastest growing economies, among which Ethiopia is one, are in Africa today. Poverty has been falling since the start of the millennium, and research demonstrates that a middle class is fuelling growth in domestic consumer demand. According to the AfDB, Africa is now home to a middle class that is comprised of “350 million people (34Pct of Africa’s population), up from 126 million in 1980 (27Pct of the population).”
Ethiopia’s is no exception to this trend. Data obtained from the World Bank reveals that the country managed to increase its per capita income to USD573.6 in 2015, up from USD307 five years ago. Analysts note that achievements like this helped the country to reduce the percentage of the population living on an income of less than USD1.25 a day, which fell from 55Pct in 2000 to 39Pct in 2005 and 29.6Pct in 2012, according to a report published by the Central Statistical Agency entitled “The Status of Poverty and Food Security in Ethiopia”.
However, Tekie Alem (PhD), lecturer in the Economics Department at AAU and Research Fellow at the Association of Microfinance Institutions, does not accept the discourse of an emerging middle class in Ethiopia. “Of course, the change that has been witnessed in supermarket shopping frees a significant number of women in Addis Ababa from the burden of household chores and may allow them to get involved in [formal labour], which in turn increases the income of the household,” Tekie told EBR. “But the middle class is not a narrow concept that can be measured by income alone.”
A robust middle class, according to the him, prevails where there is a class that can influence policymakers, social progress, knowledge transfer, the proliferation of professional associations and an increased quality of life. Without these, he argues, it is difficult and too early to talk about the emerging of middle class in Addis Ababa without conducting more thorough research. “I have not come across a single study that proves that there is an emerging middle class in Addis Ababa,” he asserts.
An expert working at the National Planning Commission, who spoke to EBR on the condition of anonymity, stresses that he does not believe that the middle class is emerging, as there is no definitive study to prove this is happening. However, he attributed the dynamism of supermarket shopping to two factors. “First, there is a tendency of poverty reduction in Addis Ababa,” he argues. “And there is a change in the lifestyle, which can be factors.”
Although there is no concrete research conducted on the issue, a survey conducted on 1,000 households in Addis Ababa by Sagaci Research, a French consulting firm, in 2013 found out that 10Pct of the households in the capital earn more than USD1,000 a month, while 24Pct earn more than USD500 per month.

The Likely Effect
Despite the different explanations about the driving force behind the emergence and growth of supermarkets, significant investments are taking place into the expansion of shopping centres, particularly by established chains.
Melaku confirms that Shoa Supermarket will soon open eight more branches throughout Addis Ababa in order to meet increased demand. “The opening of these new outlets consider areas identified by the market survey and customers’ feedback as well as areas with a large population to broaden the base of our customers,” he says.
For Safeway Supermarket, a new branch in the Summit area will open by mid-June. “Furthermore, the market assessment to open another outlet around Gerji area is already completed and that branch will be open soon,” says Esayas.
For now, modern retail in Addis Ababa is in its early stages of development. But boosted by the country’s development and the emergence of a middle class in the coming years, the number of supermarkets is expected to rise.
This expansion could bode well for other sectors as well. According to a study conducted on supermarket chains in southern Africa, these retail outlets helped to develop the agriculture sector. The study, which was published in Agrekon, an agricultural economics journal, demonstrated that “small-scale farmers who participate in the fresh fruits and vegetables (FFV) supply chains of supermarkets are more commercially-oriented and generally better-endowed with resources than those supplying traditional FFV markets.”
The ability to align themselves with the needs of supermarket supply chains helps small-scale farmers develop more efficient cultivation practices. This, according to the report, increases farmers’ incomes and develops the overall agriculture sector: “Participation in the FFV supply chains of chain supermarkets has a positive impact on small-scale farmer’s incomes. Small- scale farmers who supply supermarkets have higher incomes than those who supply traditional markets. Therefore, supermarkets have the potential to contribute to the agricultural and food processing and manufacturing industries in host nations.” EBR

4th Year • June 16 2016 – July 15 2016 • No. 40