NIQ Retail Analysis: South African Consumers Seek Value Amid Economic Strain

NIQ’s “State of the Retail Nation” reveals a 3.4% growth in South African retail sales to R637 billion in 2024, primarily driven by price increases. The FMCG sector saw a robust festive season, while the T&D market struggled with declines in telecom sales. Private label brands gained traction, and consumer focus on value has reshaped shopping habits amid ongoing economic challenges.

The latest analysis from NIQ South Africa, titled “State of the Retail Nation,” reveals moderate retail sales growth in the last quarter and throughout the full year of 2024, despite a strong festive season. South African consumers spent approximately R637 billion on fast-moving consumer goods (FMCG) via various retail channels, marking a year-over-year growth of 3.4%. This increase is largely attributed to price inflation rather than an uptick in consumption.

The Technology & Durables (T&D) sector saw stagnant growth, with a mere 1.8% increase in sales value to R90 billion. The telecom market, which constitutes over half of the T&D sector’s value, experienced a 2% decline, impacting overall performance. Notably, washing machines demonstrated exceptional growth, achieving a 16% increase in both sales value and unit sales throughout the year.

Zak Haeri, Managing Director for NIQ in South Africa, noted that despite improved consumer sentiment due to decreased load shedding and social grant increases, retail growth remained modest. Persistent high unemployment rates and escalating living costs compel consumers to prioritize value. Heightened price competition and aggressive discounts in both FMCG and T&D markets exert further pressure on growth.

During 2024, South Africans allocated R359 billion to food and liquor and R278 billion for various other products, including personal care and home supplies. Private label brands significantly outperformed the overall market, recording a 7.1% sales value growth, which totaled R98.7 billion for the year. This rise is attributed to their accessibility and consumers’ increasing focus on cost-effectiveness.

The fourth quarter indicated a 4.8% year-on-year growth, generating R177 billion in value, with liquor, personal care, and ambient foods seeing the most significant increase. December sales soared to R78 billion, reflecting a 9% increase from the previous year, primarily driven by food and liquor purchases, which comprised 58% of festive spending. Haeri remarked that consumers are leveraging loyalty programs and promotions to make their funds stretch further.

The T&D sector did not benefit from increased Black Friday spending, as growth in IT, major and small domestic appliances could not counterbalance the telecom sector’s 2% decline due to market saturation. The telecom space faced stagnant pricing and unit sales, especially as 3G devices were phased out. Prices fell by 9% in the fourth quarter, benefiting consumers as competition intensified.

Despite challenges, the T&D market marked its most successful Black Friday yet, with discounts leading to a 7% increase in sales value compared to the previous year. Online sales within the T&D market outpaced overall market growth by 9%, reflecting consumer trends toward seeking better online deals.

Looking ahead, Haeri expressed cautious optimism about consumer sentiment, noting potential challenges such as a possible VAT increase and global trade volatility. He emphasized the importance for retailers to balance value offerings and premium opportunities to remain successful amid changing economic conditions.

The “State of the Retail Nation” report underscores the shift in South African consumer behavior toward value-oriented purchases amidst economic pressures. While overall retail sales showed moderate growth driven mainly by price increases, the FMCG sector benefited from heightened festive spending. Despite the challenges in the T&D sector, opportunities remain for retailers to cater to diverse consumer needs between cost savings and premium offerings as the market adapts to evolving macroeconomic conditions.

Original Source: www.zawya.com