Good news for Pick n Pay, Shoprite and other major retailers in South Africa

There has been a positive shift in South African consumer sentiment throughout the year, setting the stage for healthy sales growth during the Black Friday and festive season periods.

This is according to NIQ South Africa’s recently published State of the Retail Nation analysis for the first nine months of 2024.

According to the analysis, South Africa’s Fast-Moving Consumer Goods (FMCG) and Tech and durables retail sectors have healthy revenue prospects – particularly as Black Friday and the festive season approaches.

This is because NIQ’s data shows that 42% of South African consumers believe they are in a better financial position than they were a year ago.

However, it is not all roses as higher costs of living, low wage growth and unemployment continue to be a challenge for many with 33% reporting that they feel worse off.

The reasons for this sentiment included increased living costs (80%), the economic slowdown (54%), and concerns regarding job security (39%).

With that said, Zak Haeri, managing director for NIQ in South Africa, said that “retailers have seen a welcome improvement in consumer confidence ahead of the two most important trading months of the year.”

“Factors that have helped to improve the outlook for retailers include a pause in load shedding, an increase in the Social Relief Distress (SRD) grant, lower fuel prices, and moderating inflation in line with global trends,” said Haeri.

He said that this clears the way for retailers with attractive promotions to benefit from stronger consumer spending over the Black Friday week, “especially Tech & Durables dealers.”

FMCG sales rise

According to the State of the Retail Nation report, South Africans spent ~ R354 billion on food and liquor for the 12 months ending September 2024 and ~ R274 billion on other goods including non-alcoholic beverages, personal and healthcare products, snacks, home and pet supplies, baby food and care, and tobacco.

The most recent quarter (Q3) has seen year-over-year growth of 2.6%, translating to a sales value change of R6.7 billion compared to Q3 2023.

Haeri noted that 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,” he 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.”

The analysis outlines that factors driving consumer decisions include loyalty programmes, promotions, and essential spending.

Consumers are seen to be choosing smaller packs to manage immediate spending or larger packs for long-term savings to stretch their budgets.

Private label products have gained a 20 basis point share in value and within the next 6-12 months, NIQ says that private-label FMCG sales are expected to exceed R100 billion annually.

“The anticipated growth in the Private Label segment and the resilience of the mainstream market reflects the adaptability of South African consumers and ongoing developments in the economy,” said Haeri.

“Moving forward, continued focus on consumer preferences and financial strategies will be essential for FMCG retailers and manufacturers to navigate the complexities of the current market,” he added.

Tech and durables push

South Africa’s tech and durables market has seen solid growth this year, with Information Technology, major domestic appliances, and small appliances all up by 9-10% in value, with attribution to the two-pot withdrawals as one of the possible reason for increased sales.

However, telecoms and consumer electronics have seen slight declines.

NIQ said that shoppers in South Africa can expect aggressive marketing and promotional pushes this Black Friday in the tech and durables sectors, but deep discounts may be scarce.

Retailers are likely to focus on bundling offers and exclusive deals rather than slashing prices drastically on high-demand electronics and appliances.

“When it comes to Tech & Durables purchases, consumers have moved from being cautious to intentional,” said Thomas Woods, Market Intelligence Lead for NIQ in South Africa.

In recent years, Black Friday in South Africa has expanded from a single day or week of deals to almost a month of promotions throughout November. However, the key shopping period remains the Black Friday weekend, when many consumers hold off making purchases to see the best offers.

“TVs, major domestic appliances and small domestic appliances are the strongest selling categories on the big day,” said Woods.

NIQ 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,” said Woods.

“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,” he added.

Read: The next big battleground for Woolworths, Shoprite and Pick n Pay in South Africa