Demand skyrockets in African cities for cheap surplus consumer goods
The demand in many sub-Saharan cities for cheap surplus product from Europe, the US, South Africa and China is skyrocketing, according to recently launched stock liquidators, Going.co.za.
Going.co.za chairman Paul Greenberg says the company is already trading strongly in several African countries where the demand for such surplus goods is increasing.
“African traders and small businesses who are buying surplus inventory from us appear to be the perfect consumers – and to top it all off, the market isn’t saturated.” Big retailers in developed countries must deal with a glut of competition, especially as online shopping gains more and more traction. Africa, on the other hand, presents a vast new frontier. A shiny new mall or superstore can count on immediate brand recognition in a town dominated by small markets, which have the benefit of familiarity but tend not to be consistent in terms of pricing, inventory and quality control.
Bright Simons, a tech entrepreneur and consumerism expert in Ghana, argues that much of Africa’s middle class consists of goods dealers and distributors. According to Simons, many African countries lack the necessary physical and legal infrastructure for Western retailers. Faulty power grids, hazy land ownership laws and a widespread lack of consumer data present unique challenges to companies used to operating on Western soil. It’s not uncommon for startup costs to exceed expectations, and for long delays to put a damper on grand retail openings.
That’s why Greenberg believes that platforms such as Going.co.za are proving to be the perfect model for businesses to obtain cheap stock to resell into local markets. Greenberg’s business is based on an e-commerce platform and businesses can simply order online and have these goods shipped directly to them. “Our business focuses on surplus goods, counter seasonal stock, refurbished product and returns. We are selling at heavily discounted prices which allow resellers to still make a profit while offering the end consumer bargain basement prices, especially while consumers are still feeling the economic pinch.”
Going sells in bulk with high minimum order quantity numbers. According to Greenberg, the company’s average value transaction was R18,450 in the first month of operation, and as it sets itself to sell larger bulk quantities, so the transactional values are anticipated grow.
“The company is already trading well,” says Greenberg. “I would ascribe it to demand for cheap product by businesses that are already online and finding a way to secure product that they never previously had access to. While we are currently selling into Ghana and Kenya, we are fixed on shifting surplus product throughout the continent and so far it looks like we are being well received.”
In addition, according to retail industry experts there appears to be a wave of liquidation stock from the US and Europe flooding into Africa. A sign of recent economic instability perhaps, but the reality is that there is a mass of surplus consumer goods from the likes of the US and many European countries that needs to be sold, and these countries are now focusing on pushing this inventory heavily throughout Africa.
Why now? There appears to be a greater demand for cheap consumer product in many African markets, and with improved distribution channels and technological advancements it is now far easier to distribute these consumer goods throughout Africa than it was just a few years ago.
According to the African Development Bank, the new middle class in Africa has risen to 34% up from 27% in 2000, which has increasing demand. Another key factor is that historically brands have mattered less than price throughout Africa, as they have not been bombarded with advertising, but now all this is changing, and quickly, thanks to television, mobile phones and general globalisation. The surplus product that is coming into Africa are often ageing stocks and outdated models, and designs that have little demand in developed economies despite their low cost. However, in many African cities well-known brands at low prices, even if they are older designs and models, still have extensive consumer uptake.
In South Africa, spaza shops make up 30% of the national retail market, and much of this internationally liquidated stock is now finding its way to consumers via such outlets. According to Greenberg: “Consumers are as cautious as ever about spending, but are also becoming more brand aware as globalisation takes hold. The challenge for businesses in rural areas is obtaining stock that is in demand, but not paying high prices. Going has been successful in securing liquidation stock from Europe and the US and bringing it into South Africa, and what we have found is that the local resellers are very quickly buying up this stock at low prices to resell to local communities at a bargain.”
For example, Going secured a parcel of 22,000 pairs of designer jeans that were originally ordered by a well-known US clothing retailer. “The retailer cancelled the order and buyers in Europe and the US were unable to move the parcel in their markets because it was seen as an unfashionable label and out of date design. We were able to sell the jeans at R50 a unit, which moved into South Africa’s township markets through local traders. Despite rand weakness, we are sourcing more and more liquidation stock overseas and the demand is outstripping our supply ability.”
The trade of surplus and liquidation consumer goods in South Africa has always been an informal and fragmented business. Sellers typically utilise internal discounting methods, retail outlets or auctioneers to sell directly to consumers or to a limited pool of professional buyers. These current remedies result in redundant handling of stock, high transportation and operational costs, loss of channel and brand control and lost recovery value.
Going is part of a growing trend of e-commerce businesses that are using technology to create transparent marketplaces that businesses can use to sell assets.