Nigeria’s shopping malls are not dying. They need to understand the market better

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Read History Go to My Account Log Out Enhanced by Google Opinion Nigeria’s shopping malls are not dying. They need to understand the market better The changing fortunes of organised retail in Nigeria have revived an important question: are shopping malls losing their relevance? The

Listen to this article Share The changing fortunes of organised retail in Nigeria have revived an important question: are shopping malls losing their relevance?

The debate has gained momentum following developments surrounding Shoprite Nigeria, including reports of a shift towards smaller neighbourhood outlets, alongside the expansion of indigenous supermarket chains such as Bokku, Market Square and Justrite. For some observers, these developments suggest that the era of large shopping malls may be coming to an end.

What is happening in Nigeria’s retail market may have less to do with the disappearance of shopping malls than with the limitations of a business model that has not always adapted sufficiently to local consumer behaviour, purchasing power and operating conditions.

The distinction is important. A retail format can lose its commercial appeal without making the broader concept of organised retail irrelevant. Indeed, the emergence of different supermarket formats may indicate that the market is becoming more diverse, with consumers choosing where and how to shop according to their immediate needs.

Nigeria’s shopping mall industry is not necessarily dying. It is being challenged to become more responsive to the market it serves.

Nigeria’s modern shopping mall industry is relatively young. The opening of The Palms Shopping Mall in Lekki, Lagos, in 2005 marked an important stage in the development of internationally styled shopping centres in the country. With major retail anchors, entertainment facilities, organised stores and dedicated parking, the development introduced a different shopping environment to many Nigerian consumers.

The model drew substantially from established shopping centre developments in South Africa and other markets. It brought together retail, leisure and other services in professionally managed commercial spaces.

This was an important development, but it also introduced an assumption that deserves reconsideration: that modern retail growth would follow a relatively uniform path towards large, formally organised shopping centres.

Nigeria already had a well-established retail culture long before the arrival of modern malls. Traditional markets, neighbourhood shops, open-air trading and personal relationships between buyers and sellers were central to everyday commerce.

Consider a household in Lagos in the early 2000s. Even where a family could afford to shop in a modern supermarket, it might still prefer the traditional market for fresh vegetables, pepper, fish, meat and other household essentials. The decision was not necessarily about affordability. It could be about freshness, familiarity, variety, trust or an established relationship with a trader.

This illustrates a basic point about consumer behaviour: purchasing power does not automatically determine shopping preference.

The introduction of shopping malls did not replace the existing retail culture. It added another option to it. The mistake would be to assume that the new format must eventually displace all the others.

A more sustainable approach to retail development begins by understanding how Nigerians actually shop, rather than expecting consumers to conform to a predetermined commercial model.

The pressures facing retailers and shopping centre operators are real. Inflation, reduced household purchasing power, currency volatility, energy costs, logistics expenses and the high cost of financing have changed the economics of doing business in Nigeria.

These pressures affect both large and small retail operators, although not always in the same way.

A large supermarket located within a shopping mall may offer convenience, variety and an established customer experience. However, its operating costs can be substantial. Beyond rent, it must account for service charges, electricity, refrigeration, security, staffing, inventory and distribution.

A neighbourhood supermarket may operate with a smaller footprint and lower overheads, allowing it to serve consumers who want quick access to everyday essentials. Its smaller scale may also make it easier to locate closer to residential communities.

Neither format is automatically superior. Their commercial viability depends on the market they serve and the costs associated with serving it.

This is where the current changes in organised retail should be examined more carefully. The expansion of neighbourhood supermarkets does not necessarily mean that larger shopping centres have become unnecessary. It may simply mean that different retail formats are finding different positions within the same market.

The more important question is whether the operators and property owners behind each format understand their customers well enough to build sustainable businesses.

For developers, this requires a rethink of how shopping centres are planned, financed and managed. The presence of a recognised supermarket brand or an impressive building is not, by itself, a guarantee of commercial success. A shopping centre must attract sufficient patronage, support viable businesses and generate returns that justify its operating and investment costs.

A successful shopping centre depends on the success of the businesses within it. Those businesses, in turn, depend on customers who find value in what they offer.

One of the lessons from the current retail environment is that the cost of occupying commercial space must be considered in relation to the revenue a business can realistically generate.

A retailer can be located in an attractive shopping centre and still struggle if rent, service charges and other operating expenses consume too much of its turnover.

This has implications for the relationship between developers and tenants. Commercial property owners cannot treat occupancy as the only measure of success. A tenant that cannot sustain its business is unlikely to remain a reliable source of rental income.

Developers must pay closer attention to catchment demographics, household spending patterns, tenant mix, store sizes, accessibility and infrastructure costs. They must also consider whether the physical design of a property allows it to accommodate changing retail requirements.

Flexibility is particularly important in a market where consumer behaviour and business conditions can change quickly. A development designed around a single anchor tenant or a rigid retail configuration may find it difficult to respond when market conditions shift.

This does not mean abandoning large shopping centres. It means being more disciplined about where they are built, how much is invested in them and the commercial assumptions on which their viability rests.

The next phase of Nigerian retail development should be defined by better market research and more realistic investment decisions, not simply by the ambition to build larger properties.

There is another reason shopping malls may retain their relevance: consumers do not visit commercial destinations only to purchase goods.

They also seek places to eat, relax, meet friends, entertain children and spend time with family. These activities create opportunities for shopping centres to develop beyond predominantly transactional environments.

A family visiting a mall may initially intend to buy groceries. The children may want to play, the parents may decide to have lunch, and the family may spend additional time exploring other facilities. The shopping trip becomes a broader social experience.

The concept is not entirely new, but its importance is increasing as consumers become more selective about how they spend their money and time.

For shopping centre operators, the challenge is to create experiences that are relevant to the surrounding community and commercially sustainable. A restaurant, cinema, children’s play area, landscaped public space or community event may encourage visitation, but these facilities must be planned around actual demand and operating costs.

Longer visitor dwell time can create opportunities for additional spending, although it does not automatically translate into higher sales. The quality of the tenant mix, the relevance of the facilities and the overall customer experience remain important.

The objective should not be to add leisure facilities simply because other malls have them. It should be to understand what gives people a reason to visit, stay and return.

A shopping centre that meets a community’s practical and social needs may have a stronger basis for long-term relevance than one that depends mainly on the reputation of its retail anchors.

Nigeria’s urban markets are diverse. A shopping centre in Lekki, Lagos, does not necessarily serve the same consumer profile as a neighbourhood retail development in Karu, Nasarawa State, or a commercial property in a regional city.

Income levels, household spending, transport networks, population density, accessibility and the nature of surrounding businesses all influence the kind of retail destination that can succeed.

Developers must therefore resist the temptation to reproduce the same model in every location.

A destination serving an affluent urban catchment may be able to support a wider range of premium retail, restaurants and entertainment facilities. A development serving a predominantly residential corridor may need to place greater emphasis on everyday shopping, essential services, convenience and affordable family recreation.

Neither approach is inherently more sophisticated. The measure of good development is whether the property responds to the needs of its market and can sustain its operations.

This is particularly relevant as urban growth extends beyond established commercial districts. Areas connecting residential communities, workplaces and smaller business centres may offer opportunities for retail development, but those opportunities need to be assessed carefully.

Developers must understand not only the population around a proposed site but also how people move, where they currently shop, what they spend and what existing commercial facilities already provide.

A viable retail destination is not created by the building alone. It emerges from the relationship between the property, its tenants, its customers and the surrounding urban economy.

The challenges facing Nigeria’s shopping mall industry should not be dismissed. Some existing developments may need repositioning. Some retailers may have to change their store formats, while others may struggle to remain profitable. Certain locations may not support the scale of commercial investment previously anticipated.

These are important realities, but they do not establish that shopping malls have exhausted their usefulness.

What they reveal is the need for a more grounded approach to retail development. The industry must move beyond assumptions based on international models, architectural scale or the presence of major retail brands. It must pay closer attention to consumer behaviour, operating costs, tenant performance and the particular characteristics of each location.

The future of Nigerian retail will therefore not be determined by a contest between shopping malls and neighbourhood supermarkets. It will depend on how successfully each format responds to the people it serves and the economic conditions in which it operates.

For investors and developers, the question is no longer simply how many shopping centres can be built or how much retail space can be delivered. It is whether those developments offer something sufficiently relevant to attract customers, sustain businesses and justify the capital invested in them.

Nigeria’s shopping malls are not necessarily dying. But the era in which developers could assume that a large, well-located building would automatically attract customers and secure long-term commercial success should be over.

The next generation of shopping centres must earn their place in the lives of the communities around them. That is not a retreat from modern retail. It is what its maturity should look like.

Yahaya Yahaya is the Group Managing Director of The Mall Investment Company (TMiC), a Nigerian investment and development company with interests in retail and mixed-use real estate.