Shoprite Nigeria is set to embark on a new strategy by opening standalone neighbourhood stores as part of its recovery plan after facing significant financial challenges. This announcement was made by Adekunle Adebiyi, Executive Director of Investments at MBO Capital Management Limited, during an interview on Nairametrics’ Drinks and Mics.

The retailer had temporarily shut down its operations to renegotiate with suppliers and address outstanding financial obligations. Adebiyi revealed that three Shoprite outlets have since reopened, indicating a cautious return to business activities. He emphasized that the decision to close was a necessary step to facilitate negotiations, stating, "We took a very, very drastic decision to just shut everything down whilst we negotiated with suppliers. Now three stores are back open."

The planned neighbourhood stores are intended to shift the company’s focus from large shopping malls to smaller, more accessible outlets in residential areas. This approach aims to concentrate resources on supermarket operations without the heavy financial burden associated with property development. According to Adebiyi, the new model will allow Shoprite to operate from leased premises, investing primarily in essential equipment like shelves and refrigeration systems.

However, Adebiyi acknowledged the financing challenges that could arise in Nigeria's banking environment, where lenders often require tangible assets as collateral. He noted that MBO Capital faced difficulties in securing bank financing during its acquisition of Shoprite Nigeria due to the lack of sufficient physical assets to support the transaction. Despite generating substantial revenue, the company's business structure has made it challenging to obtain conventional asset-backed financing, prompting investors to seek alternative funding sources.

Foreign exchange volatility has also played a significant role in Shoprite Nigeria’s financial struggles. Adebiyi pointed out that many of the retailer's rental agreements were denominated in dollars at the time of acquisition, leading to increased costs as the naira depreciated. He explained that while rent should typically account for 8 to 10 percent of a supermarket's revenue, some Shoprite locations are experiencing much higher rental costs.

Operational challenges further complicate the retailer's situation, including issues with inventory management and the loss of access to the enterprise resource planning system previously used by its former parent company. Replacing this system is expected to require billions of naira in investment, diverting funds from other critical business areas.

Shoprite's restructuring efforts follow a tumultuous period marked by changes in ownership and operational difficulties. In June 2021, a consortium led by Persianas Investment Limited acquired Shoprite Nigeria after the South African parent company exited direct ownership. The business has since operated under Retail Supermarkets Nigeria Limited through a franchise arrangement, but has continued to face rising operating costs and challenging market conditions.

Plans to reopen outlets at The Palms Shopping Mall and Circle Mall in Lagos are also in the pipeline, alongside the exploration of smaller neighbourhood store formats. However, details regarding the number of new outlets, their locations, and a timeline for the expansion have yet to be disclosed. As Shoprite navigates these changes, the focus remains on revitalizing its presence in the Nigerian retail market.