Retailers will face economic pressure for at least two years

By Megan van Wyngaard for Creamer’s Media Engineering News

With household disposable income at the lowest level in a decade, South African retailers are facing their toughest environment since the 2009 recession, which has resulted in a dramatic slowdown in new space roll-outs.
Further, the introduction of the National Credit Act and new documentation regulations have reduced the addressable living standards measure class 5 to 8 market by around 40% in terms of customer numbers.
Investec retail analyst Kirsty Laschinger told attendees at the South African Council of Shopping Centres’ Research Conference that the buying environment would not see meaningful change for at least the next two years, as there was no significant catalyst that would boost the economy.
“The tough environment is here to stay,” she warned.
Macquarie Group economist Elna Moolman added that consumers would further face growing pressures as the existing taxpayer base will be faced with a heavier burden to carry the overall economy.
As such, Laschinger noted that retailers would need to increase their focus on trading density, having more efficient stores and controlling their cost base. “This is where the difficult conversations will come in,” she highlighted.

Meanwhile, Laschinger said many international fashion clothing retailers have entered the South African market, since 2010, with H&M and Cotton On making in-roads, with the latter reporting R2-billion in turnover at end-December.
She pointed out that the entry of these new players has mostly impacted on Mr Price Group, which was established in 1885, and Woolworths, founded in 1931.
“They are all now working to reposition their businesses and address this new competition,” she said, adding that these retailers have certainly not taken a backseat approach.
“This will be very good for the consumer and fashion retail in the country,” Laschinger noted.

Author :  Megan van Wyngaard