NIQ South Africa’s State of Retail analysis for 2024 highlights a 3.4% growth in FMCG sales, driven mainly by price increases. The T&D sector faced challenges with a 1.8% growth, impacted by telecom declines. Consumers prioritized value, indicated by strong private label sales and festive season spending. While some segments prospered, overall retail performance remains challenged by economic pressures, requiring retailers to adapt effectively to changing conditions.
NIQ South Africa has unveiled its latest analysis regarding the State of the Retail Nation for the last quarter and the year 2024, indicating a modest increase in retail sales, despite a robust festive season. Consumers in South Africa expended nearly R637 billion on fast-moving consumer goods (FMCG) across various trading channels during the year, realizing a year-over-year growth of just 3.4%, primarily driven by price elevations rather than volume increases.
The Technology & Durables (T&D) sector experienced stagnant growth, with the sales value rising by 1.8% to R90 billion. This sector’s overall performance was hindered by a 2% decline in the telecom category, which constitutes over half of the T&D market’s total value. Notably, washing machines performed well, achieving a monthly sales increase and overall growth of 16% in both sales value and units.
Zak Haeri, Managing Director for NIQ in South Africa, noted, “Despite much-improved consumer sentiment off the back of lower levels of load shedding, social grant increases, and slower price increases, retail recorded only moderate gains in sales during 2024. High unemployment and rising living costs continue to challenge many households, with consumers seeking value when they shop.”
For the year 2024, South African consumers allocated R359 billion towards food and liquor and R278 billion towards assorted goods, such as non-alcoholic beverages and personal care products. Private label brands led the pack with a 7.1% growth in sales value, reaching R98.7 billion, benefitting from broad category coverage and increased consumer focus on cost efficiency.
The fourth quarter reflected a 4.8% year-over-year growth, representing R177 billion in sales, with liquor, personal care, and ambient foods displaying the most significant increases. Notably, December shopping reached R78 billion, marking a 9% rise from the previous year, with food and liquor accounting for 58% of total festive sales.
“Consumers are still focusing on essential spending and taking advantage of loyalty programmes, private label brands, and promotions to stretch their rand further,” asserts Haeri. He highlights that while consumers vary their purchasing patterns to maximize perceived value, there is also substantial growth observed in super-premium segments, suggesting that some households are not entirely affected by economic constraints.
The T&D industry faced challenges this past year, exacerbated by market saturation and slower upgrading cycles in smartphones, despite notable growth in certain segments. The IT segment rose by 7%, major domestic appliances grew by 10%, and small appliances rose by 9%. However, negative growth in the telecom section contributed significantly to overall declines.
The telecom market not only suffered negative value growth but also flat unit sales as 3G devices gradually disappeared from the market. Nevertheless, T&D saw its highest Black Friday sales yet, with considerable discounts prompting a rise in unit sales. “The introduction of the two-pot retirement saving system may have contributed to higher sales during the fourth quarter,” remarked Thomas Woods, Market Intelligence Lead for NIQ in South Africa.
Looking forward, Haeri concludes, “While consumer sentiment has improved over the past year, potential headwinds remain. However, we anticipate that mainstream consumers will adapt as economic conditions evolve. Retailers that effectively balance value offerings with premium segment opportunities will be positioned to excel in the forthcoming year.
In conclusion, the State of Retail analysis reveals a cautious optimism in South Africa’s retail landscape, driven by modest gains in sales largely influenced by price changes and ongoing economic pressures. The FMCG sector has shown resilience, particularly during the festive season, while the T&D market struggles with saturation challenges. The shift towards private label brands underscores consumer behavior focused on value, and the T&D sector’s diverse segments illustrate a potential for growth amidst adversity. Ultimately, adaptability and thoughtful positioning will be crucial for retailers aiming for success in the year ahead.
Original Source: www.zawya.com
