South African retailers should get set for a recovery in retail sales between 2024 and 2026, according to a new report conducted on behalf of fintech Capital Connect.

The report shows that total real retail sales are forecast to grow by 1.8% in 2024, gradually increasing to 2,1% in 2026. This marks a welcome recovery, following an estimated 1% decline in total real retail sales in 2023. The positive trend is expected to be fuelled by lower CPI and interest rates as well as some employment growth from the second half of 2024.

Growth in general dealer (+1,5%) as well as furniture and hardware store (+1,5%) sales is expected to show the strongest recovery in 2024. This follows a difficult year for both sectors, with general dealers recording a decline of 2,4% and furniture and hardware stores of 5% in 2023.

Specialised food and beverages outlets are also forecasted to record a mild recovery (+1,3%) in 2024 following negative growth of 2,2% in 2023. Textiles and clothing – the strongest performer in 2023 with growth of 5,7% – is forecast to have more moderate growth of 1% for 2024.

In 2025 and 2026, retailers selling pharmaceutical products and clothing, textiles and footwear are expected to be the outperformers following low growth in 2024. Pharmaceutical retailers are forecast to reach growth of 3,3% for 2026, while clothing stores should see growth of around 3,4% in the same period.

Sumay Dippenaar, GM: marketing at Capital Connect, says: “The data shows that retail sales are expected to touch R1,224-trillion by 2026, indicating that there is a sizeable market for retailers that are agile, innovative and responsive to customer needs. Even with the consumer’s wallet under pressure, there are still many growth opportunities in the retail fraternity.

“The report suggests that 65% of household consumption expenditure accrues from the spending of the 30% highest income (household) earners. However, continuation and extension of the Social Relieve of Distress (SRD) grant will also support retail trade sales among lower income demographics.”

According to Dippenaar, retailers may consider the following tactics to improve their retail sales growth:

* Enhance the shopping experience to differentiate from competitors. This includes offering customer service and the store environment. Consider how chains like Pick n Pay are investing in specialist areas like bakeries, fish shops, cheese bars, and delicatessens to attract footfall.

* Optimising inventory to ensure stock aligns with anticipated demand trends and customer preferences. Retailer can use data analytics to examine past sales data, market trends, and seasonal variations to predict future demand for products.

* Invest in marketing and promotions to build mind share among their target customers. Social media and search advertising, promotional flyers, and local newspaper ads are good ways to reach customers.

* Expand product offerings to focus on growth markets. They could consider expanding into new product categories – like a grocery store adding a liquor store to its offering – or introducing premium products to attract shoppers looking for unique offerings.

* Invest in e-commerce capabilities–including home delivery and click-and-collect–to capture online sales and reach customers who prefer to shop online.

* Build strong relationships with customers by investing in loyalty programmes to encourage repeat purchases and foster customer loyalty. Even a simple stamp card with a discount or freebie for every 10 purchases can keep customers coming back.

Says Dippenaar: “As per the report, the forecasts aren’t cast in stone, so retailers should remain adaptable to changing market conditions and consumer preferences. But whether retailers want to invest in promotions, shoppertainment, buy seasonal stock in bulk at discounted rates, or refurbish their stores, they need access to fast, frictionless opportunity capital to execute their growth strategies.”