As we edge into the New Year, while numerous reports show that there is much to look forward to within South Africa’s improved retail sector — this will be underpinned by effort, adaptability and a degree of change.
It appears that in the shadow of the pandemic, innovativeness is king, and customers have warmed to digital shopping platforms, resulting in less in-store shopping and then, generally choosing shops closer to home.
We are buying bigger baskets or trolleys of essential goods so that we don’t have to shop as frequently, and we are also using mobile apps and online platforms to have our groceries delivered right to our doors. The retailers’ response has been a flurry of apps and adapting websites to be more user-friendly, especially the larger supermarkets.
This trend is expected to continue going into 2022 and beyond and, while the retail sector is picking up there are some considerations and adaptations required in the light of the damaged supply chain experienced during 2021.
According to bizcommunity, while the retail sector has rebounded it cautions: “Of course, it may take some time before things are fully back to normal, but retailers can at least rest easy in the knowledge that shipping costs should normalise, giving them one less rising cost to worry about.”
However, there are a number of influences that will drive the cost of food up, including constantly rising electricity and fuel prices. According to the Pietermaritzburg Economic Justice & Dignity group (PMBEJD)’s latest Household Affordability Index, “the average South African household food basket cost R4,317,56 in October 2021 – increasing by R98,08 (2,3%) month-on-month, and R400,83 (10,2%) year-on-year”.
Indications show that not much is set to change, which in turn will put severe strain on us consumers and will force retailers and brands to find innovative ways to remain relevant and retain their customer base. Convenience will always play a key part in retail shopping, and online has proven its mettle here. The challenge will be to integrate online with physical brick-and-mortar establishments.
Bridging this gap has been the emergence the mobile app. Research by the Economist Intelligence Unit indicates that the surge of shopping applications will continue, driven by the greater selection offered through the mobile apps platform, and eagerly embraced by both South Africa and Africa overall.
This in turn, is putting pressure on brick-and-mortar stores who will need to boost their service offering of online channels. As noted in the report, “many shops offer a ‘click-n-collect’ hybrid channel, and the shop itself serves as the pick-up point”. A more omni-channel marketing approach will take advantage of tapping into evolving and varied customer needs.
South African retailers have also tried to ease the financial burden of its customers by offering store credit, loans, or insurance, with varying degrees of success. Into this field came Shoprite’s launch of a free bank account to its more than 20-million Xtra Savings customers.
Embracing sustainability
In an ever-shifting landscape, sustainability remains a top priority, as South Africans are very environmentally conscious and aware. Back in 2015, a Nielsen Global Corporate Sustainability Report outlined that 68% of our countrymen were prepared to support and buy from brands that showed a commitment to sustainability practices, scoring higher than the global average of 66%. It is in this sector that brands need to come to the table and illustrate commitment to embracing eco friendly methods in production and distribution.
Also, we are not prepared to allow brands to get away with non-compliance when it comes to the environment! A Mastercard study revealed that “98% of South African adults are willing to take action to combat environmental and sustainability issues, and that 76% feel it’s now more important for businesses and brands to do more for the environment”. Think of the recent stand-off around Shell conducting seismic explorations along our coastline as an example.
Another report by Deloitte South Africa, the Consumer Sentiment in Retail Report, supported these findings, outlining how, by 2019, social media engagement around retail’s impact on sustainability and environmental issues had increased considerably within the country. This was most evident within the Millennial sector, where seven out of 10 said they were willing to pay more for a product ‘with a conscience’.
Innovative sustainability efforts are now squarely on the retailers’ shoulders if they intend encouraging and growing investment in their offerings. This is where trust and loyalty play a role in customer retention and brand building. Those brands that can show that they are acting in a responsible way, with transparency and honesty, such as doing away with plastic bags and investing in packaging that is both recycled and recyclable, will go a long way to garner the requisite consumer following. Come 2022, these criteria will only grow.
During this uncertain time nevertheless, optimism in the retail sector is growing, with Africa leading the charge.
The Economist Intelligence Unit’s Retail 2022 report found that “retailers are already looking to invest in African markets now in order to reap the potential they may have ten or even 20 years down the line”.
The report cites that by 2030, Africa’s top 18 cities could have a combined spending power of $1.3 trillion, as the African continent’s retail demand will see solid growth next year and into the next decade. To make this happen however, the establishment of strong local partnerships and a deep understanding of local markets to meet consumer needs, is key.
BEE amendments
Also, in the mix for 2022, is the introduction of stricter BEE rules for South African businesses, with the Department of Employment and Labour preparing to introduce the amended Employment Equity Act. The department said that the legislation aims to reduce the regulatory burden on small businesses and add rules for doing business with the government.
This will see the “introduction of five-year sector targets to mark the beginning of a clean slate”, according to the department’s director of employment equity Ntsoaki Mamashela.
“All current employment equity plans will fall away on 22 September 2022, and the new plans will have to be aligned with five-year targets,” she said and added, “Self-regulation has not worked.”
Needless to say, there are concerns with the unilateral imposition of targets by the minister, which may not be practically implementable by electronic communications, operators and industry stakeholders, as well as running a risk to existing jobs in a difficult economic climate.
Time will tell.
The year ahead is going to be interesting on many fronts, with numerous changes inevitable and, weathering the storms ahead and breaking through the clouds will require the fortitude and commitment that we South Africans are famous for.
Happy 2022, let’s make it work!
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