SA’s major retailers are showing turnover growth driven primarily by price inflation and expansion strategies. However, real volume growth remains stagnant, Trade Intelligence’s latest Corporate Retail Comparative Report has found.
For the first half of 2024, combined turnover among the six largest retailers — Shoprite, Spar, Pick n Pay, Woolworths, Clicks and Dis-Chem — reached R330bn, a 9.4% increase.
However, this growth largely masks underlying challenges, as real volume is not growing. According to Trade Intelligence economist Carey Leighton, the industry’s turnover growth is “being driven by price inflation and new stores”, leaving much to be desired in terms of actual consumer demand.
“But beneath the surface, there are some interesting dynamics at play,” Leighton said.
Despite the flat market, according to the report, retailers are under profit pressure, with gross margins falling to a four-year low of 21.4%. This has prompted firms to invest heavily in technology, supply chain efficiencies and expanding private brands.
Retailers added a net total of 378 new stores in the first half, focusing on higher-margin formats such as forecourts and pharmacies, in an effort to capture market share in a competitive landscape.
The competition is particularly fierce among high-income shoppers, with Checkers outperforming Woolworths Food. Checkers’ average turnover per store is now 2.6 times that of Woolworths, underlining the need for suppliers to develop tailored strategies to meet the demands of this lucrative segment, the report said.
Moreover, inflation continues to exert pressure on profit margins, as retailers navigate rising input costs while attempting to maintain prices that the consumer can afford. The effect of load-shedding has eased, but expenses related to it still cost retailers about 0.4-0.5 percentage points in operating margin in the 2023 financial year, the report said.
Trade Intelligence said while the market presents challenges, the right insights and strategic investments could differentiate successful retailers from those struggling to adapt.
With store expansions and a focus on high-margin categories such as liquor, convenience food and private brands, retailers are striving to redefine their competitive edge in a complex market.
“Leaders are making big decisions that will shape not just their businesses but the future of fast moving consumer goods — we wish them well and take comfort in the R19.7bn capital expenditure plan (largely already spent) for the 2024 financial year — our retailers are here to stay for the long term.”
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