South African retailers, particularly in the fast-moving consumer goods (FMCG), and Tech & Durables sectors, are set to benefit from heightened retail activity as consumer confidence starts to recover ahead of Black Friday.
Consumer intelligence company NIQ South Africa yesterday unveiled its latest State of the Retail Nation analysis for the first nine months of 2024, revealing a clear shift in consumer sentiment and providing a solid foundation for anticipated sales growth as the Black Friday and festive seasons approach.
According to NIQ’s data, 42% of South African consumers feel they are in a better financial situation compared to a year ago.
This upbeat sentiment is, however, counterbalanced by persistent challenges, with 33% of respondents expressing that they feel financially worse off.
Factors contributing to this sentiment include soaring living costs (80%), an economic slowdown (54%), and fears around job security (39%).
Zak Haeri, managing director for NIQ in South Africa, said retailers have observed a welcome uplift in consumer confidence just in time for the two most critical trading months of the year.
“Several factors have contributed to a brighter outlook for retailers, such as a pause in load shedding, an increase in the Social Relief Distress (SRD) grant, falling fuel prices, and moderating inflation in line with global trends,” Haeri said.
“This clears the way for retailers with attractive promotions to benefit from stronger consumer spending over the Black Friday week, especially Tech & Durables dealers. However, the market remains challenging as consumers focus on value for money. South African consumers are making purposeful choices. They are prioritising in-home activities, pre-planned purchases and waste avoidance.”
The Tech & Durables market in South Africa has sustained substantial growth in both sales value and unit numbers throughout the year, with Information Technology seeing an increase of 9%, major domestic appliances up by 10%, and small domestic appliances rising by 9% in sales value.
Conversely, sectors such as telecoms (-1%) and consumer electronics (-2%) have witnessed slight declines.
Thomas Woods, market intelligence lead for NIQ in South Africa, said consumers have moved from being cautious to intentional when it comes to Tech & Durables purchases.
“We have noticed a jump in major domestic appliance sales in September, with fridges and washing machines up in value by 12% and 21% respectively. Top loader washing machines have shown over 20% value growth throughout the year. Two-pot withdrawals are one of the possible reason for increased Tech & Durables sales as we enter the last stretch of the year,” Woods said.
South African consumers have shifted Black Friday from a singular event to a month-long phenomenon, with the crucial weekend heralding significant retail activity.
“TVs, major domestic appliances, and small domestic appliances are expected to be the hot-selling categories on the big day,” Woods predicts.
“We expect new brand entrants, especially Chinese disruptors to use Black Friday, as an opportunity to break into new markets. While there are major promotional pushes, we anticipate that overall margins for retailers and manufacturers will be higher than in prior years.
“Most discounts are not expected to be as deep this year as in some other years, however, there is a golden opportunity for retailers and manufacturers to capture revenue growth.”
In the realm of fast-moving consumer goods, South Africans have shelled out R354 billion on food and alcohol over the past 12 months leading to September 2024, with an additional R274bn spent on non-alcoholic beverages, personal care products, snacks, and household items.
The latest quarter showcased positive year-on-year growth of 2.6%, equivalent to an increase of R6.7bn compared to the third quarter of 2023.
Haeri said essential expenditures were of utmost importance, with consumers tending to prioritise spending on utilities and education over grocery and household items.
“In the FMCG sector, we see particular emphasis on Fresh Produce, Health and Wellness, and Fresh Meat,” Haeri said.
“Fresh and perishable goods continue to see improved sales volumes due to lower levels of load shedding. Liquor and ambient food are experiencing the greatest incremental growth, driven specifically by beer and frozen meat.”
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