South Africa's Retail Sector Shows Promise for Final Quarter of 2024, Despite Economic Challenges
South Africa's retail industry is showing signs of resilience as it heads into the critical Black Friday and festive season periods, according to the latest State of the Retail Nation report by NIQ South Africa.
The analysis, which covers the first nine months of 2024, reveals strong revenue prospects for the Fast-Moving Consumer Goods (FMCG) and Tech & Durables sectors, buoyed by an uptick in consumer confidence and strategic retail promotions.
NIQ’s data highlights a significant shift in consumer sentiment, with 42% of South African consumers reporting they are in a better financial position than they were a year ago. However, economic hardships such as higher living costs, low wage growth, and persistent unemployment continue to weigh heavily on many households. Of the 33% who feel worse off, the majority cite increased living costs (80%), the economic slowdown (54%), and job insecurity (39%) as key reasons for their negative outlook.
“Retailers have seen a welcome improvement in consumer confidence ahead of the two most important trading months of the year,” said Zak Haeri, Managing Director for NIQ in South Africa. “Factors such as a pause in load shedding, an increase in the Social Relief Distress (SRD) grant, lower fuel prices, and moderating inflation have all contributed to a more optimistic retail environment.”
Despite this, Haeri cautioned that the market remains challenging, with South African consumers now prioritizing value for money. “Consumers are making purposeful choices. They are focusing on in-home activities, pre-planned purchases, and waste avoidance,” he added.
According to the data source, the Tech & Durables sector has seen solid growth throughout 2024, with notable increases in sales value across several categories. Information technology products have grown by 9%, major domestic appliances by 10%, and small domestic appliances by 9%. However, segments like telecoms and consumer electronics have seen slight declines, down 1% and 2%, respectively.
“Consumers have moved from a cautious to an intentional approach when purchasing Tech & Durables,” said Thomas Woods, Market Intelligence Lead at NIQ. “For example, in September, sales of major domestic appliances such as fridges and washing machines saw significant growth, with fridges up by 12% and washing machines by 21%. This trend is likely to continue as we head into the final quarter of the year.”
With Black Friday becoming a month-long event in South Africa, the critical sales weekend is expected to remain the focal point for retailers, especially in categories like TVs, major domestic appliances, and small domestic appliances. “While there will be major promotional pushes, we expect overall margins for retailers and manufacturers to be higher this year,” Woods says. “Discounts may not be as deep as in previous years, but there is a strong opportunity for revenue growth.”
The FMCG sector also showed resilience, with sales increasing by 2.6% year-over-year. In the 12 months to the end of September 2024, South African consumers spent R354 billion on food and liquor and R274 billion on other FMCG products, including non-alcoholic beverages, personal care items, snacks, and household goods, NIQ says.
Haeri says despite ongoing financial constraints, South Africans are still prioritising essential items. “Fresh produce, health and wellness products, and fresh meat continue to see strong sales, especially with the easing of load shedding. Liquor and ambient food, particularly beer and frozen meat, have also experienced notable growth.”
Private label products have gained ground, with a 20 basis point increase in value share. Most of this growth is attributed to the top five manufacturers. “The rise of private label goods reflects the adaptability of South African consumers who are increasingly looking for ways to stretch their budgets,” Haeri says. “We expect the value of private label FMCG sales to exceed R100 billion annually within the next 12 months.”
The data revealed that as South African consumers remain cautious but optimistic, retailers are preparing for a critical end to the year. The forecast for Black Friday and the festive season suggests strong sales opportunities, particularly for retailers who offer value-driven promotions in the Tech & Durables and FMCG sectors. However, consumer behavior is expected to remain more intentional and discerning, with a focus on products that provide both immediate and long-term value.
“The retail market is not out of the woods yet, but there is clear potential for growth in the final quarter of 2024,” Haeri says. “Retailers and manufacturers must stay attuned to evolving consumer preferences and continue adapting their strategies to meet the demands of an increasingly budget-conscious market.”
PERSONAL FINANCE