Despite increased economic pressures and rising inflation costs, the South African retail industry performance figures remain largely in check with international retail performance trends. This is according to the recent Deloitte 2014 Global Powers of Retailing report.
The report which unpacks the mechanics of the South African retail industry, reveals that five of South Africa’s top retailers featured on the list of the world’s 250 largest retailers, contributing an estimated total of $ 4.3 trillion into global retail revenues measured from June 2012 to June 2013. The listed South African Retailers include:
- Shoprite, which ranked in 94th position
- Steinhoff International Holdings (otherwise known as JD group) in 125th position
- Pick ‘n Pay in 137th position
- Spar Group in 172nd position
- Woolworths entering at 234th
Further inspection into annual sales figures indicated promising growth yields when compared to developed markets. The seven African/Middle Eastern companies (of which South African accounts for the above five) listed revenue growth of 13.5% and net profit margins of 4.4%, when compared to the 4.9% revenue growth and 3.1% net profit margins of developed markets.
While the last quarter of the South African fiscal period yielded higher than expected growth figures, growth of sales revenue will be severely hindered by the following economic constraints:
- low consumer confidence;
- higher interest rates and fuel prices;
- unfavourable economic indicators such as GDP, CPI, PPI and
- weakening rand value.
This puts inflationary pressure on consumer goods, further stretching the reach of the consumer’s purchasing power. Local retailers have the difficult task of adapting marketing strategies to the fast changing economic conditions.
As a result, the expectation is that the South African retail industry’s performance figures will be hindered by the conditions of a pressurised economy. In a move to protect their interest and market position, retailers will have to make a concerted effort to develop value added offerings to consumers. Low trading, price comparing and ‘value for your buck‘ type interactions are what the local consumer will be looking for, while they ride this wave of financial economic pressure. Retailers will do well to manage growth expectations so as to mitigate the expected shortfall in consumption.
To read on, please click here for the full report.