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Can the retail sector save SA’s economy?

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With news just in that retail sales in South Africa rose 1,4 percent year-on-year in September of 2016 after being flat in August and above market expectations of a 1% increase, the sector is seeing the highest increase in months.
This news bolsters the cautiously optimistic feedback from the recent Beyond Retail conference, hosted annually by UCS Solutions. As global economic woes challenge every sector, a question posed by some in the market is if retail can save the South African economy?
A round -p of the top take outs regarding this question vary, however the overall tone is positive.
Director and chief economist for Econometrix Dr Azar Jammine says that the outlook is slowly becoming rosy, with retail sales growing 3% this year.
With population expansion in South Africa as well as urbanisation, there is a lot of long-term economic growth potential, he explained, adding that demographic trends should be researched and capitalised on by the retail sector.
While there has been some “doom and gloom” in the economy, there are lots of reasons to be optimistic including the fact that the local drought seems to be over, the electricity supply constraint has eased, inflation has turned out to be lower than expected, petrol prices are falling, interest rate hikes are no longer a certainty, big businesses are doing well in South Africa with solid balance sheets, commodity prices have recovered from the January lows and the Rand is still very cheap with costs rising at a solid pace – a great opportunity for exports.
Jammine concluded that while we can’t be too positive short-term, there is light at the end of the tunnel. He says: “We have a lot more to do to improve the structural weaknesses of the economy if we are going to make a grand statement and say that the retail sector is saving our economy.”
Times are certainly changing, according to Maryla Masojada, MD of Trade Intelligence.
By focusing on the political, economic, social, technological, legal and environmental factors that affect retail behaviour – more commonly referred to as PESTLE factors – she said that retailers need to start looking at shoppers and their needs as a community. “Food and grocery retailers really understand the reality of what is going on in the country,” she says.
Shoprite’s Project Thirst is a very relevant example. The campaign focuses on assisting communities who are impacted by severe water shortages due to the drought in South Africa and shows just how powerful retailers can be in the surrounding communities.
Masojada identified eight retail trends, but first looked at how consumer behaviour drives these trends. This behaviour includes hunting for value, time being a luxury, health as well as technology and its convenience. The eight trends are:
* The power of the retail brand;
* Price warfare;
* Category profitability;
* Margin through efficiencies;
* Targeted collaboration;
* Digital enablement;
* Growth beyond South African borders; and
* Channel blurring.
Masojada pointed out that retail can play a significant role in the economy by appealing to the health and well-being of a consumer and bringing them a solution as well as education, awareness and engagement. In fact, retail has the power to change behaviours with plenty of opportunity for collaborative thinking, innovation and sustainability.
A little bit of curiosity and a lot of passion can take you far, says Netflorist CEO Ryan Bacher, who outlines the differences between the South African industry and Silicon Valley, where there is still a lot of potential for the local industry to grow.
These differences include:
* South Africa has hardware while Silicon Valley has software;
* South Africa has goals while Silicon Valley has purpose;
* South Africa has profit while Silicon Valley has growth; and
* South Africa focuses on singular while Silicon Valley focuses on singularity.
Bacher explains that while e-commerce makes up 1% of overall retail locally, it is a space that can be dominated with the right idea and the right strategy, contributing to the economy and its survival.
Retail can certainly save the economy, according to David North, group executive: strategy and corporate affairs and Pick `n Pay and Jacques de Kock, head of supply chain at Clicks Group.
By focusing on highly advanced products that already exist in South Africa, including personalised promotions to inspire customer loyalty, the self-service checkout and the power of private label products, the two showed just how optimistic the industry is looking.
North pointed out that government also needs to embrace retail as an engine of growth, focusing on its contribution to the economy through collaboration, innovation and job creation.
One example of this innovation is Pick `n Pay’s new self-service till points, which North argued contributes to more convenient shopping without affecting jobs. His view was that technology should be trusted as a tool to help us work better.
For De Kock, the power of the private label is tantamount as it faces a burden to cut prices while maintaining quality due to South African consumers reducing their overall spending while looking for value and savings. Clicks Payday Savings and Pay Less features are thus very important to customers, their group has found. Their online offering also speaks to changing retail trends.
It’s these efforts to evolve with the consumer that will strengthen the role that retail plays in the economy.
“As we fast approach the Christmas retail season and enter into 2017, it is apparent that this sector is one to watch in the global drive towards sustained recovery,” says Mark Belcher, senior executive at UCS Solutions.
He adds: “What is clearly evident is how much potential there is in the sector, which needs to be harnessed strategically. The next year is going to be an important one as retailers rise to the challenge.”