Several factors have recently come together in a perfect storm of threats that South African retailers must defend against, says Howard Barratt, principal consultant at Retail Directions, a retail management platform whose main client is Cotton On.

War, extreme weather, power outages, looting and connectivity issues are the main challenges facing South Africa’s industry now, while consumer belt-tightening amid soaring inflation is also a major challenge .

Annual consumer price inflation (CPI) reached 7.8% in July 2022, Statistics South Africa (Stats SA) said on Wednesday. This was an increase of 1.5% compared to 7.4% recorded in June 2022.

The agency noted that the main contribution to the annual inflation of 7.8% was food and soft drinks; housing and communal economy; transport; and various goods and services.

Food and non-alcoholic beverages increased by 9.7 percent year-on-year and contributed 1.7 percentage points to the total annual CPI of 7.8 percent.

In July, the annual inflation for goods amounted to 11.5% against 11.0% in June; in the service sector — 4.2% against 3.9% in June.

“The recent series of unexpected events – both local and global – have had a significant negative impact on the sector, serving as a reminder that retailers must prioritize resilience and agility as key areas of investment to reduce risk and increase responsiveness and turnaround , when the unexpected happens, Barratt said.

The week-long riots in July spread across Gauteng and KwaZulu-Natal provinces and damaged and destroyed 1,800 shops in 200 shopping centres, wiping R50 billion from the economy.

The government’s recent re-imposition of load shedding has not only led to operational problems, but at Stage 6 – the most severe blackout level – the long and frequent blackouts are estimated to cost the country’s already ailing economy about R6 billion per week.

In addition, the war in Ukraine has led to a sharp increase in food and fuel prices – in recent months, local prices for gasoline and diesel fuel have risen by almost 40%.

The grocers answer

Analysis by Moneyweb has revealed that the country’s biggest retailers have tried to protect consumers from rising food prices.

Shoprite Group, Pick n Pay and Woolworths report domestic retail price growth below food inflation. Pick n Pay is reported to have maintained domestic selling price inflation at 5% for the 18-week period ending 3 July.

Woolworths said food prices for the 52 weeks to June 26 were flat at 3.5%, while core commodity inflation was steady at 3.9% and Shoprite said domestic retail price inflation for The 52-week period ended July 3 was 3.9%.

NielsenIQ Local Market Analysis is the latest report from Shopper Graphics that reveals interesting broader changes in household consumption and purchasing behavior.

This shows that despite the steady growth in cost per customer over the past two years, this has not been accompanied by growth in volume/unit sales – a clear indication of inflationary pressures.

Local consumers were also found to shop less often and at fewer retailers, but when they are in store they spend more than one trip, with an increase in total shopping cart spending driven by LSM 1-4 due to the introduction of social grants.

Under cost pressures, consumers are not buying more, they are paying more for less. This is reflected in the total value of sales (excluding spirits and tobacco) up 7.6%, but with a very sluggish increase in units sold over the same period of 1.1%.

Read: Warning for South African shopping centers due to fall in retail sales

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