State of the Retail Nation Q3: Consumer confidence starts to recover ahead of Black Friday

Zak Haeri, MD at NIQ South Africa

NIQ’s data shows that 42% of South African consumers believe they are in a better financial position than they were a year ago. However, higher costs of living, low wage growth and unemployment continue to be a challenge for many. Among the 33% that report they feel worse off, the reasons for this sentiment included increased living costs (80%), the economic slowdown (54%), and concerns regarding job security (39%).

Zak Haeri, MD for NIQ in South Africa, says: “Retailers have seen a welcome improvement in consumer confidence ahead of the two most important trading months of the year. Factors that have helped to improve the outlook for retailers include a pause in load shedding, an increase in the Social Relief Distress (SRD) grant, lower fuel prices, and moderating inflation in line with global trends.

“This clears the way for retailers with attractive promotions to benefit from stronger consumer spending over the Black Friday week, especially Tech & Durables dealers. However, the market remains challenging as consumers focus on value for money. South African consumers are making purposeful choices. They are prioritising in-home activities, pre-planned purchases and waste avoidance.”

Tech & Durables Black Friday: Expect aggressive pushes, but no deep discounting

South Africa’s Tech & Durables market has experienced solid sales in value and units every month for the year to date. In sales value, information technology (up 9%), major domestic appliances (+10%) and small domestic appliances (+9%) have all performed well for the first three quarters of the year, while the telecoms (-1%) and consumer electronics (-2%) segments are slightly down.

“When it comes to Tech & Durables purchases, consumers have moved from being cautious to intentional,” says Thomas Woods, market intelligence lead for NIQ in South Africa. “We have noticed a jump in major domestic appliance sales in September, with fridges and washing machines up in value by 12% and 21% respectively. Top loader washing machines have shown over 20% value growth throughout the year. Two-pot withdrawals are one of the possible reason for increased Tech & Durables sales as we enter the last stretch of the year.”

Over the past few years, Black Friday in South Africa has grown from a day or a week of promotions to encompass nearly a full month of specials over November. However, the Black Friday weekend is the critical moment since many consumers wait till then to see what rewards are on offer. “TVs, major domestic appliances and small domestic appliances are the strongest selling categories on the big day,” says Woods.

“We expect new brand entrants, especially Chinese disruptors to use Black Friday, as an opportunity to break into new markets. While there are major promotional pushes, we anticipate that overall margins for retailers and manufacturers will be higher than in prior years. Most discounts are not expected to be as deep this year as in some other years, however, there is a golden opportunity for retailers and manufacturers to capture revenue growth.”

FMCG sales rise 2.6% year-over-year

South Africans have spent R354bn on food and liquor for the 12 months to end September 2024 and R274bn on other goods including non-alcoholic beverages, personal and healthcare products, snacks, home and pet supplies, baby food and care, and tobacco. The most recent quarter has seen year-over-year growth of 2.6%, translating to a sales value change of R6.7bn compared to Q3 2023.

“Essential expenditure remains an imperative, with consumers prioritising spending more on utilities and education, above grocery and household items. In the FMCG sector, we see particular emphasis on fresh produce, health & wellness, and fresh meat,” says Haeri. “Fresh and perishable goods continue to see improved sales volumes due to lower levels of load shedding. Liquor and ambient food are experiencing the greatest incremental growth, driven specifically by beer and frozen meat.”

Factors driving consumer decisions include loyalty programmes, promotions, and essential spending. Consumers increasingly opt for pack sizes that either moderate immediate spending (smaller packs) or provide long-term savings (larger packs) in their quest to stretch their rand further. Private label products have gained a 20 basis points share in value, with most gains attributed to the top five manufacturers. Within the next six to 12 months, the value of private label FMCG sales will breach R100bn in annual sales.

Haeri says: “The anticipated growth in the Private Label segment and the resilience of the mainstream market reflects the adaptability of South African consumers and ongoing developments in the economy. Moving forward, continued focus on consumer preferences and financial strategies will be essential for FMCG retailers and manufacturers to navigate the complexities of the current market.”

Sources:
Based on NIQ’s comprehensive Retail Measurement Service (RMS), which is the largest retail (grocery) data source in the country and the only currency used by all of South Africa’s major retailers. This benchmark data comprises more than 10,000 branded retail outlets (e.g. supermarkets and garage forecourts) and more than 143,000 independent stores (e.g. spazas and taverns) across South Africa’s nine provinces, and measures more than 80% of all retail grocery transactions.