CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF STUDY
Retail in Nigeria was once confined to
traditional open markets and small local storekeepers loosely referred to as
the informal retail sector of the Nigerian economy which serviced communities.
Between 1960 and the early 1980s, there were standard retail malls which operated
chain stores across the country; their number reduced because of the harsh
business environment and the decline in business in that era, leaving the
country without standard malls for retail business.
This gap led to the growth of the informal or traditional
retail market, which traditionally constitutes a formidable part of the retail
structure in Nigeria.
Today, Nigeria is experiencing a
tremendous shift to a more sophisticated structure as formal or organized
retail continues to gain ascendency. The distribution chain and the organization
of outlets continue to reflect those of a rapidly evolving economy as standards
of living improve and as the population continues to snowball. In the past
eight years, Nigeria’s population has grown from 150 million, as established by
the population census conducted in 2006, to a country with an estimated
population of 171 million people by 2013. In the midst of this, the middle
class continues to expand even as 51 percent of the country’s population now
lives in cities.
The rise of organized retail has been
rapid in Nigeria in the last two decades. NBS data shows that between 2001 and
2004, the wholesale and retail sector grew by 10 percent per annum. By 2006,
its contribution was 16 percent. In the first halves of 2011, 2012 and 2013, it
contributed 15.58 percent, 17.05 percent and 18.44 percent of GDP respectively.
The old or traditional retail system which is adjudged to account for almost 90
percent of retail activity in Nigeria has continued to decline because of
government’s policy, changes in the composition of Nigeria’s population, rising
income level and increasing sophistication of the Nigerian consumer. In the
last decade, the stable political environment, consistently high oil prices,
and rise in GDP have had positive impact on per capita income, which has in
turn moved more Nigerians into the middle class. Today, more families shop
together and organized facilities which meet their need are attracting more
shoppers. Therefore, the old or traditional structure of retail continues to
give way to the new.
More than ever, the Nigerian consumer is
interested in a decent shopping environment, neatly-arranged and labeled
commodities and the experience that goes with buying at an organized outlet.
Opportunities in wholesale and retail
stem from the fact that demand has continued to rise. NBS data shows that based
on the structure and level of development of the economy, the average Nigerian
household spends as much as 80 percent of its income on consumables like food
and drinks, clothing, transportation, shelter, education, electronics and power
supply. The average amount devoted to consumption has played a major role in
elevating Nigeria to the status of a 171 million-populated retail powerhouse on
the African continent.
Nigeria has evolved
from being a country with 150 million population with no real mega retail store
in 2006 to one with 171 million people who have about 20 mega retail stores in
less than 10 years. The country has the capacity to support even more malls
across its major cities.
1.2 STATEMENT OF PROBLEM
In shopping centers for instance, the
rent paid by a tenant bears relation to the ability of that tenant to trade
profitably from that location. This has always been a salient criterion but as competition
has forced retailers to accept lower margins for their profit levels, the
impact of ‘cost’ on the profit equation has become more important. Retailers of
Shopping Centers have been forced to look at the cost equation in terms of
their space requirement. They are therefore less willing to accept the level of
rents in the market and may consider relocating if they feel that current
rentals are too high for their cost requirement. This should mean that the market
will adjust to ensure that value in exchange (rental value) and value in use
(worth to the retailer) converge (French, 2000). Hence Sir mans and Guidry
(1992) noted that understanding the determinants of shopping center rents is
important to the Estate Surveyors and Valuers who are involved in market
analysis and site selection of such properties.
Nevertheless valuers fail to account for
variation between retail function and the impact of individual property factors
on rental value. This potentially leads to misguided valuations. In determining
the rental value of a subject property, inappropriate evidence may be
undervalued to determine a unit value even though in the market place the
subject and comparable properties belong to distinct tiers (that is the
occupier of the subject property would not be expected to make a bid for the
comparable property). Also, valuers interpretations of evidence may lead to
over or under estimations of rents as the perceived impact of a factor may have
a positive impact on trade and hence rental bid for one type of retailer and a negative
impact for another. Hence Hager and Lord (1985) stated that “the success of a valuation
relies extensively on personal knowledge, expertise and interpretation of many variables
which exist”.
However, the complexity of the property
price formation process requires an analytical approach which makes it possible
to settle the cross-influences between the numerous dimensions affecting
property values (for shopping centers) and to assess the marginal contribution
of each attribute underlying property buying decisions (Des Rosier et al.,
1996).Much work has been done in the determination of property values
(residential and shopping centers) in the United Kingdom, United States and
Australia (Trott, 1980; Fraser, 1988;Kihore, 1996). In Nigeria, very little
effort has been made. The few that exist only looked at the determinants of
residential and office property values (Bello, 2000; Oladapo, 2000).
1.3 Objectives of the Study
As a central objective,
this study seeks to assess the economic impact of the development of shopping
mall on the existing retail business in Enugu metropolis. The specific
objectives are to:
1. To
determine if increase in the development of shopping mall will lead to extinction
of retail business in Enugu metropolis.
2. To
examine the correlation between the development of shopping mall and
performance of retail businesses in Enugu metropolis.
3. To
assess the economic contribution of the development of shopping mall on the
retail prices.
1.4 Research Questions
From the aforementioned
research objectives, the following research questions were formulated
1.
To what extent will the development of
shopping mall leads to extinction of retail business in Enugu metropolis?
2.
What is the correlation between the
development of shopping mall and performance of retail business in Enugu
metropolis?
3.
What is the economic contribution of the
development of shopping mall on the retail prices?
1.5 Research Hypotheses
Based on the above
research questions, the following hypothesis were formulated
Ho:
Shoprite has no significant impact on specific dimension of the local
retailers business in Enugu state.
H1:
Shoprite
has significant impact on specific dimension of the local retailers business in Enugu state.
1.6 Significance of the Study
This study is
significant in that it attempts to pinpoint some of challenges facing owners of
retail business because of the increase in the development of shopping mall in Enugu
metropolis. It has both theoretical and practical significance. Theoretically,
the finding of the study will be useful to both students and scholars who wish
to advance their knowledge on economic impact of the development of shopping
mall on the existing retail business in Enugu. On the other hand, the findings
will be of practical significance to the management of retail business
operators and other medium scale business organizations, employees and the
government, as it will help them to improve the challenges facing retail
business operators in Enugu metropolis.
Significantly, the findings are expected to
make the sole proprietor to see the need to improve staff strength through
employment and development of skilled manpower. This will help them to plan
adequately and suggest the need to organize seminars to the general public on
the danger of the aforementioned challenges, adding to the above, it will
specifically create awareness on how the challenges facing retail business
operators can be managed.
1.7 Scope of the Study
The research work
covered the assessment of the economic impact of the development of shopping
mall on the existing retail business in Enugu metropolis Nevertheless; it
focused generally on enumerating the challenges and tested ways of
averting/managing it.
1.8 Limitations of the Study
The study was limited
by the fact that it relied solely on one enterprise and some of the personnel
did not volunteer the necessary information.
1.9 Definition of operational terms
Shopping
Centre/Mall: ICSC (1999) defined a shopping centre
as a group of commercial establishment, planned, developed, owned and managed
as a unit related in location, size and types of shops to the trade area the
unit serves. It provides on-site parking in a definite relationship to the
types and sizes of shops.
Real
estate: A real estate refers to land plus anything
permanently fixed to it, including buildings, sheds and other items attached to
the structure. Real estate can also refer to the rights and interest inherent
in ownership of real property.
Residential
property: Realtors Commercial Alliance(2005) defines Single-
or multifamily housing units that are used, serve, or are designed as a place
of residence
Real
estate or property market: CEM (2006) defined real property
market as the interaction of individuals who exchange real property rights or
interests for other assets such as money. The function of the real estate
property market is to establish a pattern of price so that given sufficient
time, land resources are allocated according to their most profitable (highest
and best use) relative to other land resources.
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