Business confidence among retailers may be back at the long-term average, but those in domestic clothing retailers are being hit hard by online competitors like Shein. <\/p>\n\n\n\n
According to the Bureau for Economic Research’s Retail Survey for 2024Q2, business confidence among retailers increased by 5 percentage points to 39%, which is level with the long-term average. <\/p>\n\n\n\n
The survey was notably done before the general election, which led to substantial uncertainty in respondents’ outlook. <\/p>\n\n\n\n
“Less load-shedding than expected and a slight moderation in headline inflation may have
boosted retail confidence,” said the BER.<\/p>\n\n\n\n
“This was likely countered by political uncertainty surrounding the election and the expectation that interest rates may remain higher for longer than anticipated at the start of the year.”<\/p>\n\n\n\n
There is also a significant variation in the differing retail subcategories. <\/p>\n\n\n\n
Confidence among semi-durable goods retailers, such as textiles, clothing, footwear, and leather goods dropped from 38% in 2024Q1 to 68%.<\/p>\n\n\n\n
The drop in confidence follows weak sales in 2024Q1 following a high base period following the Covid-19 pandemic and the 2023 Rugby World Cup. <\/p>\n\n\n\n
Online competitors like Temu and Shein may also be straining the sales<\/strong> of domestic clothing retailers<\/strong>.<\/p>\n\n\n\n Confidence among furniture retailers and new vehicle dealers also dropped, with these sectors also vulnerable to high interest rates. <\/p>\n\n\n\n That said, retailers in non-durable goods and hardware reported improved confidence.<\/p>\n\n\n\n “Despite improved confidence, retailers of non-durable goods are more pessimistic about sales “Stats SA reported a 1.9% increase in sales volumes for the first quarter, but the BER survey results suggest that the trend may weaken this quarter.” <\/p>\n\n\n\n Hardware retailers are far more bullish, with confidence more than tripling from 15% to 47%.<\/p>\n\n\n\n For the first time in two years, hardware retailers’ confidence was near the long-term average, with the index tracking the volume of orders placed by hardware retailers increasing from -28 to 21 index points (against the long-term average of -21), supporting the bullish sales outlook.<\/p>\n\n\n\n “Looking ahead, less load-shedding than in 2023, a moderation of inflation and (hopefully) less political uncertainty, once the new parliament has been announced, may boost the sector,” said the BER.<\/p>\n\n\n\n “However, consumers’ real disposable income will be constrained for as long as real interest rates remain high, with a particular impact on furniture retailers and new vehicle dealers.”<\/p>\n\n\n\n Time almost up<\/strong><\/p>\n\n\n\n While Shein and other retailers like Temu have been putting local retailers under pressure, tax changes expected to come into effect from 1 July may put a stop to this.<\/p>\n\n\n\n From 1 July, the South African Revenue Service (SARS) has committed to tax all clothing parcels with an import duty of 45% plus VAT, breaking the tax loophole these importers have been able to exploit to get products into the country for cheap.<\/p>\n\n\n\n The so-called de minimis<\/em> rule allowed Shein and Temu to get clothing parcels of under R500 through customs with a 20% import duty and 0% VAT.<\/p>\n\n\n\n Mark Goodger, CEO and founder of Maritime Legal Solutions and Chartered Tax Adviser from the South African Institute of Taxation told Broad Media<\/strong><\/a> that in terms of high-volume, low-value consolidated shipments, it is apparent that Shein and Temu used this provision.<\/p>\n\n\n\n Clothing retailers complained that they always had to pay the 45% plus VAT rate for imported clothes, putting them at a disadvantage to direct-from-China importers like Temu and Shein.<\/p>\n\n\n\n SARS is now closing this exploit to level the playing field.<\/p>\n\n\n\n
volumes than during the first quarter,” said the BER. <\/p>\n\n\n\n
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