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South African retail industry gears up for the holiday season
South African retail industry gears up for the holiday season

South African retail industry gears up for the holiday season

RETAILER NEWS

Bizcommunity.com - Nov 9th 2016, 09:46

Data released by Statistics South Africa in mid-September shows that the pace of retail sales growth eased in July, rising just 0.8% year-on-year (y-o-y). The July growth rate was well down on the 1.4% posted the previous month, though retail sales rose overall 2% y-o-y in the three months through to the end of July. 

Contributing to this slowing of sales growth is the continued high cost of borrowing, a household debt-to-disposable income ratio of 75.1% in the second quarter of 2016, according to financial services firm Investec, and uncertainty over South Africa’s economic prospects.

Sentiment sag

While there was a three-point improvement in the overall sentiment level in the most recent Nielsen Consumer Confidence Index, released in early September, the score of 78 was still short of indicating optimism. More significantly, 77% of respondents said it was not a good time to spend, the same rate as in the first quarter.

In late August retailer Massmart issued a statement saying it would be increasingly hard to lift sales in the current economic environment.

Consumers were exercising caution in major purchases, in particular on durables, as inflation, uncertainty, and high-interest rates were prompting buyers to put off spending, Guy Hayward, CEO of Massmart, told local press. Massmart itself, however, saw profit growth of 19.2% in the first half of the year, in part underpinned by an 8.7% increase in sales.

Higher and hire

Despite the July dip in sales growth, the sector’s busiest period has yet to come, with retailers hoping to make up for some of the foregone revenues earlier in the year.

Retail and wholesale trade is set to lead the way in hiring in the fourth quarter, as the industry gears up for the holiday season, according to a survey by workforce and employment analysis firm ManpowerGroup.

With a net employment outlook of over 20%, the retail and wholesale sector is the most buoyant going forward in terms of hiring potential, the ManpowerGroup report found, while other sectors could also benefit from retail’s seasonal bounce.

“The expected hiring gains in the wholesale and retail trade sector are usually expected towards the end of the year, as retail trade increases during the festive season,” Lyndy van den Barselaar, managing director of Manpower South Africa, told local press in September. “This may tie into the expected gains in the transport, storage and communication sector, as the inflow of imported products increases to ensure that stock levels are adequate for the increase in retail trade.”

Of the 755 employers that responded to the Manpower employment outlook survey, 15% said they expected to increase staffing levels, while 6% predicted a decrease and 78% anticipated no change, with the extraction and manufacturing industries being the least likely to lift hiring levels.

Development opportunities

There was also measured optimism in a report on opportunities in the retail property segment by Nedbank Corporate and Investment Banking (NCIB).

Though the pace of rollout of new retail space was slowing and could scale back further, increases in floor space were still at double-digit levels the NCIB report said. In the 12 months to the end of June, 661,000 sqm of space had been added to existing stocks, with 216,000 sqm completed in the second quarter, according to the report issued in early September.

The June total represented a 25% y-o-y increase in completed floor space, though throughput from the development pipeline is expected to ease in the first half, with a near 30% decrease in new retail construction planning approvals over the same 12-month period.

The report added that one of the factors in the slowdown in new projects was the strong growth in recent years, which meant the rate of retail space rollout had outpaced real expansion in sales. This could bring an increase in vacancy rates unless there was a sustainable rise in consumer spending, the NCIB study said.

Despite some overcrowding in certain segments, NCIB said there were still opportunities for development in smaller-scale retail outlets for those serving new residential centres in peri-urban and rural areas. Developments in some of these areas could offer revenue-positive returns on investment, even as the flow of large-scale retail space onto the market eases.All rights reserved ©. Bixcommunity.com 

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