NIQ’s State of Retail Report: South African Consumers Shift…

NIQ South Africa’s report unveils modest retail growth of 3.4% in 2024, with consumers prioritizing value amid economic pressures. The T&D market struggled, particularly telecoms, while private label brands thrived. The festive period contributed positively to the FMCG sector. Retailers will need to adapt to potential economic changes moving forward.

NIQ South Africa recently published its “State of the Retail Nation” report, highlighting that retail sales experienced moderate growth in 2024. South African consumers spent approximately R637 billion on fast-moving consumer goods (FMCG), with an annual growth rate of 3.4%, primarily attributed to price inflation rather than increased consumption. Despite a robust festive season, the retail landscape remains challenging due to economic pressures.

In the Technology & Durables (T&D) market, growth was stagnant, with a modest 1.8% increase to R90 billion. Contributing factors included a 2% decline in the telecoms sector, which encompasses over half the T&D market’s value. Notably, washing machines stood out with a sales increase of 16% in both value and unit sales throughout the year.

Zak Haeri, Managing Director for NIQ South Africa, emphasized that, “Despite much-improved consumer sentiment… retail recorded only moderate gains in sales during 2024.” Persistent issues such as high unemployment and escalating living costs have caused consumers to prioritize value in their purchasing decisions. The competition to provide lower prices has further suppressed growth in both FMCG and T&D markets.

During the 2024 fiscal year, South African consumers allocated R359 billion to food and liquor and R278 billion to a range of other goods, including personal care and home supplies. Private label brands flourished, achieving 7.1% growth and reaching R98.7 billion in sales, effectively capitalizing on consumer demand for cost efficiencies.

The final quarter showcased a notable 4.8% increase in year-over-year sales, adding R177 billion in value. December marked a significant month, with R78 billion in retail expenditures, a 9% rise from the previous year. Food and liquor dominated sales, making up 58% of total festive season expenditures as consumers adopted at-home celebration trends.

Haeri remarked, “Consumers are still focusing on essential spending… on the flip side, we also see healthy growth in super-premium segments, indicating that some consumers are not feeling the pinch.” Economic conditions are prompting a shift toward perceived value, not solely linked to discounts.

Despite a surge in Black Friday sales, the T&D sector faced challenges primarily due to saturation in the smartphone market. Although IT, major household appliances, and small domestic appliances experienced growth, the significant telecom segment displayed a 2% decline.

Unit sales in the telecom domain remained flat as 3G phones were phased out. Consumers have increasingly opted for more standard 4G devices, which now comprise over 60% of units sold, aided by competitive pricing from Chinese brands.

During the unprecedented Black Friday event, sales value and unit sales recorded a 7% and 12% improvement respectively. Prices dipped by approximately 5%, demonstrating a change in the discount landscape compared to previous years.

According to Thomas Woods, Market Intelligence Lead for NIQ, “the introduction of the two-pot retirement saving system may have contributed to higher sales during the fourth quarter.” Online sales in the T&D sector increased by 9% across the year, further reflecting a consumer focus on obtaining better deals online.

Looking forward, Haeri remarked that despite improved consumer sentiment, challenges such as potential VAT increases and global trade volatility remain pertinent. He emphasized the importance of retailers adapting to changing market conditions while offering value to maintain competitiveness moving ahead.

In summary, the “State of the Retail Nation” report underscores a cautious but present growth in South Africa’s retail sector, driven primarily by inflationary pressures rather than consumption increase. The T&D sector faced unique challenges, particularly in telecoms, while private labels gained traction among cost-conscious consumers. Moving forward, adaptability in response to economic factors will be crucial for retailers to succeed in the ever-evolving market landscape.

Original Source: www.zawya.com