Financial Data
Updated 20 Nov 2018


6 Trends and the future of South African retail

Retail trends are continuously changing but here are six shifts taking place that could result in you re-assessing your growth strategy for the next five years.


29 January 2018  Share  0 comments  Print


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Consumer trends, in store behaviour, store technology and retail presentation are accelerating at phenomenal rates.

“Shopper expectations and demands have changed, especially as far as convenience, variety and shopping experience is concerned. Customers today are far less predictable and much better informed. Markets have indeed changed and retailers have to change as well,” explains Dr Dirk Prinsloo, MD of South African specialist research firm Urban Studies. 

However, trends and change are directly impacted by the economy and what is happening in the socio-political space.

Here’s a snapshot on what the future South African economy is expected to look like:

The future economy 

Although the economic forecast for South Africa’s medium term is of positive growth, with the 3rd Quarter of 2018 reaching as much as 2.7% growth, according to Trading Economics. This is still only a marginal improvement, and won’t result in a large increase in consumer spend. Retailers relying on GDP growth to increase their sales will need to look for alternatives.

The recent further downgrade by ratings agencies has resulted in a reduced business and consumer confidence and less spend. “Bar a swift, confidence-inspiring change to SA’s current political landscape, consumer spending is likely to remain depressed,” says an industry expert. 

Related: Think like a smaller retailer and you can achieve growth

The economic downgrade will also reduce the amount of international investment South Africa receives, which on the one hand isn’t positive for retailers looking for outside investment. But on the other hand, it could result in less international brands entering the South African market and reducing the heightened competition.      

Industry snapshot 

Modern -shopping -centre

You can use this mini retail SWOT analysis to ensure that the industry is ready for what you have planned in the next few years. You’ll need to take advantage of the opportunities, while leaning on the strengths, avoiding the weakness and mitigating the threats.

Strength

  • Increase in customer spend: Stats SA released data revealing that retail trade sales increased by 5.4% year-on-year in September 2017. With ‘other’ retailers achieving growth rates of 19.4% and textile, clothing, footwear and leather goods retailers reaching 8.6%.
  • Established foundations: A strength for a large portion of South African retailers is that they already have a footprint within South Africa. This means they can use this footprint to fund further expansions or investment opportunities.

Weakness

  • Rand volatility: “The weakening currency carries the risk of pushing up inflation because imported goods are more expensive,” explains Fatima Bhoola, economics lecturer, Wits
  • Drought: Multiple droughts, first across the middle of South Africa and now in the Western Cape will continues to impact the food and beverage sector for the foreseeable future.

Opportunity

  • The growing middle class: The increasing middle class is enabling South African retailers to expand their target markets and locations, while still increasing their sales numbers, reports PwC.
  • Increasing GDP growth: Even though growth is expected to be slow forecasts Trading Economics, growth is still growth and will make a difference for retail business in South Africa.

Threat

  • Sluggish growth: In the short term, economic growth in South Africa is expected to be lethargic, reports Business Day. It continues to say that without some radical changes South Africa’s economy will continue to “muddle along the path of growth mediocrity.”
  • Growing local and international competition: The retail industry is highly competitive, not to mention the continued growth of both local and international competition.

Six trends shaping the future of retail 

Future -of -retail-

New ideas and trends emerge daily, many of which are here to stay. But there are other trends which are fleeting, lacking stay power and serious influence.

Here are six retail trends to help you stay current in the retail market, according to retail specialists:

1. Living ethically

This growing trend in retail includes products that are ‘free from’ or ‘made with’, but has also widened to include the motives of employees and local communities. “Health, wellness and wellbeing is the next greatest trend to drive the planet,” says IBM. This trend extends to the individual, who aspires to be a good member of the ecosystem in which the brand or retailer participates: 

Actionable insights

  • To incorporate this trend into your business offer DIY options, as well as products such as recycling bins. Not only are environmentally friendly products and ingredients part of this trend, but also aspects such as improved working conditions and employment practices.  
  • Ethical retail includes everything. Start-ups are making more of an impact in this trend, compared with some opaque macro brands.     
  • A word of caution, if you decide to position your brand as living ethically, and you can’t provide transparent proof of its ethics, you might risk the reputation of your business and the support of your customers.

Related: How digital transformation can help retailers capture and grow market share

2. Smart living

From Samsung’s Smart TV’s, to Amazon’s Alexa, an intelligent personal assistant, From Corning glass, intelligent interactive glass panels, to LG’s ‘smart’ fridge, which orders items for you when they’re running low: there are numerous retailers and suppliers that are aiming to own the path into the home and office. 

This trend is catering to the consumers need to have emotionally-charged, experience-rich ‘occasions’. 

Actionable insights

  • Look to supply or stock items that use the Internet-of-Things to allow consumers’ homes to be fully connected. This will turn the home owner into an unconscious consumer, at the commoditised product level.

3. Loyalty

Loyalty isn’t what it used to be, in today’s market, just because someone bought from you yesterday, doesn’t mean they’ll buy from you today. Brand loyalty has become something retailers have to constantly work to retain.

Today, loyalty is given to who gives the best and consistent customer experience. Your customers are looking for an engaging experience every time they step into a store, if you aren’t delivering on this, you’ll lose their loyalty.   

Actionable insights

  • The best way to create loyalty is through an engaging and constantly improving customer experience. 

Case study: Nike has incorporated retailtainment into their stores by introducing indoor basketball courts, a treadmill set in front of monitors that simulate runs in different locations, and a small soccer enclosure. Adidas is using a similar strategy by having sports-themed layouts including locker rooms that serve as dressing rooms, and a patch of turf for customers to test shoes and other products.

4. Customer experience 

Smart retailers are completely overhauling their destination stores, and streamlining the convenience offering. Numerous retailers are doing this by implementing completely new experiences. 

Case study: Adidas is testing pop-up stores that use body scanners and 3D-knitting machines to make custom sweaters in a matter of hours. Coach stores, a leading New York design house of modern luxury accessories and lifestyle brands, includes an area for made-to-order handbags, and on the store’s second floor is a workshop where a full-time craftsman is visible working, doing repairs and personalising items for shoppers.

Actionable insights 

  • Approach the design of your retail store from the aspect that people want to be involved in the production process, want to be able to use the products properly, or want to be entertained and engaged while in your store.

5. Customer analytics 

What you need to ask yourself is, “What should take centre stage?” Is the answer the product on the shelf, in a world where anyone can put a product on a shelf, or the call for personalisation based on trusted and invited knowledge-rich service?

Personalisation services, are turning data into knowledge, then insights, and then actions. This is enhancing the relationship between the retailer and the consumer, along with the customer journey.

Actionable insights 

  • Incorporate customer analytics into your digital strategy to ensure you engage with the customer when they’re most open to it.

Related: How to provide an unbeatable omnichannel experience for customers

6. AI and other realities

Recently, retailers have begun using automated assistance both in-store and online. 

Case Study: Lowe’s Home Improvement, equivalent to South Africa’s Builders Warehouse, are trialling LoweBot, an in-store autonomous retail service robot enhancing the customer experience. LoweBot is able to find products in multiple languages and effectively navigates the store. It can also help customers with simple questions, and assist with real-time inventory management. 

From this trend the retail industry can expect to see several non-facing customer roles disappear, such as inventory control and delivery, potentially being the first to go. Algorithms will run a large portion of what people do today, such as monotonous unenjoyable purchases or chores.

Virtual Reality and Augmented Reality enable consumers to browse stores from anywhere, interact with brands and products at any time, and make buying decisions on-the-go.

Actionable insights 

  • Incorporate AI into your retail offering by implementing customer service chatbots or information kiosk.
  • Virtual Reality and Augmented Reality can be used in limited, cost-effective ways to improve consumer experience. Such as an augmented reality mirror, so shoppers can see what make-up will look like on, without actually having to test it. 

NEXT STEP

For access to retail growth capital, contact us today or talk to one of our representatives in the Community section. 

 


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