The latest NIQ State of the Retail Nation report indicates a modest growth in South African retail sales, driven mainly by price increases, not consumption. The FMCG sector saw R637 billion spent, with private label brands thriving. Conversely, the T&D sector struggled, particularly in telecoms. The outlook remains cautious with economic challenges ahead, but adaptation to consumer needs may present opportunities.
NIQ South Africa’s recent State of the Retail Nation report for 2024 indicates that retail sales are growing moderately, with South African consumers spending nearly R637 billion on fast-moving consumer goods (FMCG). However, this growth, at a rate of 3.4%, is primarily attributed to price increases rather than elevated consumption levels.
In the Technology & Durables (T&D) sector, sales showed minimal growth of just 1.8%, totaling R90 billion. This performance was negatively impacted by a 2% decline in the telecoms segment, which comprises over half of the T&D market’s value. Conversely, washing machines demonstrated significant growth, achieving a 16% increase in sales value during the year.
Zak Haeri, Managing Director of NIQ in South Africa, noted that even with improved consumer sentiment stemming from lower load shedding and increased social grants, retail growth remains modest. Key challenges include high unemployment and living costs, leading consumers to prioritize value in their shopping habits while price competition continues to hinder growth in both FMCG and T&D sectors.
During 2024, South Africans allocated R359 billion to food and liquor and R278 billion to miscellaneous goods, including personal care and baby products. Notably, private label brands outperformed others, achieving 7.1% growth and reaching R98.7 billion in total sales, as consumers increasingly emphasize savings.
The fourth quarter marked a notable 4.8% increase year-over-year, translating to R177 billion, with liquor, personal care products, and ambient foods leading the growth. Specifically, December saw R78 billion in retail sales, a 9% rise from the previous year, with food and liquor constituting 58% of this activity, reflecting an ongoing preference for at-home consumption.
Haeri remarked that consumers are focusing on essential expenses and leveraging loyalty programs and promotions to maximize their budget. The strategy varies based on cash flow, with some opting for bulk purchases while others prefer smaller packs to minimize immediate costs.
Despite a robust Black Friday event, the T&D market experienced an overall decline, particularly in telecoms, attributed to market saturation and slowed smartphone upgrades. While IT appliances and major domestic appliances surged, this growth couldn’t offset the telecoms segment’s 2% decline due to stagnation in the smartphone market.
As the 3G transition progresses, 4G phones dominate sales, accounting for over 60% of transactions. Discounts during the fourth quarter averaged 9% due to heightened competition, particularly from new brands. Notably, online T&D sales grew 9% across the year, reflecting a shift toward digital shopping strategies.
Looking ahead, Haeri acknowledges potential challenges like VAT increases and global trade uncertainties, but suggests that retailers able to balance value with premium offerings will excel in adapting to evolving market conditions.
Overall, the NIQ State of the Retail Nation report reveals a complex landscape for South African retail in 2024. While growth in retail sales is modest and driven by price increases rather than consumption, there is a marked shift toward value-oriented purchasing behaviors. Private label brands are prospering as consumers prioritize savings, and the T&D sector faces challenges due to saturation and economic pressures. To thrive, retailers must effectively balance reward promotions with opportunities in premium markets.
Original Source: www.zawya.com
