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Cape Town - South Africa's retail sector certainly has a role to play in saving the economy, according to Maryla Masojada, managing director of Trade Intelligence.
"No one understands the reality and dynamics of the SA shopper better than grocery retailers. Operational efficiencies are on every retailer's mind," she said at Beyond Retail 2016, which took place in Camps Bay on Thursday.
Masojada pointed out that the increase in electricity tariffs has had the single biggest impact on the retail industry.
"We are seeing amazing innovation regarding cost savings and change of products on the shelves," she said.
From a consumer point of view, Masojada said the fuel price increases have influenced shopping behaviour. It has led to an increase in popularity of convenience stores, for instance.
"The retail industry needs partnerships to deal with innovation. Collaboration between government, business and labour is essential to face challenges," she said.
"Retailers also have an important role to play in responding to the needs of communities - to assist shoppers in a very real way."
Retail space
Her research shows that about 2 400 formal retail stores have been added in SA over the past five years. Operating margin is one of the challenges putting grocery retail under pressure.
"It is still guerrilla warfare out there. The pressure on margins is real. We have not seen smart shopping like we are seeing now. This kind of cherry picking is putting massive pressure on retailers," she said.
Another aspect of the fierce competition is that ranges are being cut. "If it does not add value a supplier should not be taking that to the retailer," said Masojada.
In the convenience store/spaza sector she said foreign nationals have largely taken it over.
"These foreign traders know how to operate. Their collaborative buying method is giving even some of the large retailers a good run for their money and has brought a whole new dymanic to this sector," she said.
Retail trends
She named a few retail trends and the consumer behaviour driving them:
- Consumers want more value for money due to the tough economic climate. They are willing to trade down because of it;
- Consumers want to live better. Getting sick is expensive so wellness and health are becoming more important;
- Time is a luxury for consumers so they want convenience when it comes to retail;
- The digital impact on the retail sector is increasing;
- Shoppers are demanding more and more transparency about products and ingredients. Retailers can, therefore, put huge pressure on suppliers to make changes to products as demanded by shoppers.
Power of the retail brand
Another trend she mentioned is what she calls the power of the retail brand.
"If there is an emotional connection, shoppers will trust a retailer's offering more. Retailers increasingly own the relationship with the shopper as they sit nicely in the middle between suppliers and shoppers," said Masojada.
"The majority of retailers are articulating that private labels are seen as having growth potential. For retailers it has become about creating efficiencies - to bring a product to shoppers at a better price."
For long term sustainability the retail sector must think about things a bit differently, in her view.
"The formal and informal retail sector can work together in a symbiotic relationship. Franchising is also a powerful way to help SA's economy," she said.
David North, group executive: strategy and corporate affairs at Pick n Pay, agreed with Masojada that retail has the potential to save SA's economy.
He said innovation in the sector does not mean fewer jobs. It is also not just about "people stocking shelves" as there are various skills to be learnt, including customer service.
To him the main question is why government is not embracing retail as a driver to contribute to the economy.
"Retail is growing faster than the economy as a whole. Total retail growth was 3.3% in 2015. That is why it is odd that government is not looking at the retail sector as a way to drive further growth in the economy," said North.
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