Ethiopia’s retail industry holds considerable potential for growth.

This is if two new reports by Sagaci Research are to be believed.

According to the company, Ethiopia’s capital Addis Ababa holds potential for 15 to 20 new modern supermarkets, as well as five to 10 new shopping malls.

Over the past years, sub-Saharan Africa has seen a steady rise in the construction of modern shopping centres, especially in countries such as Ghana, Nigeria and Kenya. According to Sagaci, modern retail in Addis Ababa is still in the early stages of development compared to other countries in the region.

The research revealed that Addis Ababa has eight modern retailers operating a total of 15 stores. All these retailers are mid-sized local companies trading from medium-sized stores, with no single store being larger than 1,500m².

Sagaci says there are currently no international retailers operating in Ethiopia. A recent Financial Times article, however, suggests that Walmart is interested in entering the country. The world’s largest supermarket chain got a foothold in Africa when it bought a majority stake in South Africa’s Massmart a few years ago.

Interviews with more than 1,000 households in Addis Ababa revealed that around 24% of households have monthly incomes higher than US$500. Sagaci says this threshold makes them attractive consumers in the main product categories. About 10% of households earn more than $1,000 per month.

According to Sagaci, only 0.5% of groceries bought in Addis Ababa are currently through modern outlets. This number is however, expected to increase to 1.5% by 2018 as more modern supermarkets open up.

With a population estimated to be around 85m, Ethiopia is Africa’s second most populous nation after Nigeria. Although Ethiopia is known for being a relatively closed economy, the country has seen some foreign investment in recent years.

In 2010, South African consumer goods manufacturer Tiger Brands signed an agreement with the East African Group of Ethiopia relating to the formation of a new food, and home and personal care joint venture to operate in the Ethiopian market. South Africa’s Pretoria Portland Cement Company last year also announced that it has secured a minority stake in Ethiopia’s Habesha Cement Share Company.