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How To Succeed In Unstructured African Markets - Education - Nairaland

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How To Succeed In Unstructured African Markets by Execed: 5:43pm On Oct 14, 2021
Africa is the home of unstructured markets in the world. From Accra to Zanzibar, Gauteng to Lagos, you cannot travel up to three miles without finding an informal sector business activity. Anyone serious about business on the continent knows the markets are ubiquitous and account for over seventy percent of Sub-Saharan Africa’s workforce. Unstructured markets are economic activities operating largely within the continent’s informal sector. As the African Continental Free Trade Area creates opportunities on the continent, it is important to understand what it takes to win in unstructured markets.

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Yet, businesses hardly sell effectively within these markets. Consider the case of a beauty startup in Ghana and a healthcare startup in South Africa that targeted informal sector consumers and ended up going out of business after losing millions of dollars in investment. Several businesses on the continent have also become unprofitable from selling products or services through retailers, wholesalers and distributors in the informal sector.

Most businesses fail in Africa’s unstructured markets because they do not understand how these markets work. There are three common myths that hinder the ability to understand these markets. The first myth is that unstructured markets are illegal markets. The second is that market players lack business acumen, and the third is that unstructured markets are a homogenous block. Insights from ten years of research show that the reality is different. Unstructured markets are largely fragmented markets that include gray market operators (such as fake phone sellers in Computer village) , hybrid markets adopting formal and informal sector practices ( such as Nollywood, agency banking networks, etc) and legitimate operators ( such as registered businesses in the Kadogo economy of East Africa). The level of structure varies within the market, and operators have developed business acumen through years of informal tutelage and apprenticeship.

Unstructured markets have a unique form, and unmasking the composition can make all the difference. Research shows that Africa’s unstructured markets are the most suitable places for testing new product offerings and price scenarios. For example, Guinness Nigeria tested its Orijin brand in open-air markets of Ibadan and Port Harcourt before arriving at the right product quality and price. Shoppers and trade partners within the market prefer below the line activities and price bargaining is a common practice. Distributors and retailers within these markets play additional buying roles, including gatekeeping, influencing, education and others. Failing to understand how these markets work trigger disastrous consequences. So, how can organizations sell to win in Africa’s unstructured markets? Here are five winning strategies to consider.

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Unstructured markets continue to dominate Africa. This is a wake-up call for businesses to think differently about what makes markets work on the continent.

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