Retail sales rise modestly as consumers seek value amidst economic challenges

The latest analysis from NIQ South Africa reveals a cautious but notable momentum in the country's retail sector, despite economic headwinds.

For the calendar year 2024, South African consumers spent nearly R637 billion on fast-moving consumer goods (FMCG), reflecting a year-over-year growth of just 3.4%. This increase was primarily attributed to rising prices rather than higher consumption levels.

The Technology & Durables (T&D) market displayed a contrasting trend, achieving a modest sales value increase of only 1.8%, totalling R90bn. A significant 2% drop in the telecoms sector—accounting for over half of the T&D market's value—dampened overall performance.

However, washing machines shone as a bright spot, with consistent monthly sales growth culminating in a remarkable 16% increase in both sales value and units sold.

Zak Haeri, managing director for NIQ in South Africa, elaborated on these findings.

“Despite much-improved consumer sentiment from reduced load shedding, social grant increases, and slower price hikes, retail reported only moderate sales gains in 2024," Haeri said.

High unemployment and the rising cost of living persist as significant challenges for many households, compelling consumers to hunt for value when shopping. Intense price competition and aggressive discount strategies continue to pressure growth across the FMCG and T&D sectors.”

The festive season proved to be particularly fruitful for the FMCG sector, with total spending reaching R359bn on food and liquor, alongside R278bn on other goods such as personal care products and home supplies.

Notably, private label brands flourished, achieving a 7.1% growth in sales value, totalling R98.7bn. This surge indicates consumers’ growing emphasis on cost-saving measures when shopping.

The fourth quarter of 2024 saw a robust 4.8% growth year-over-year, equating to R177bn in retail spending—an increase of R8bn compared to the previous year.

Consumers particularly splurged on liquor, personal care, and ambient foods. December alone accounted for R78bn in retail spending, a 9% rise from 2023, with food and liquor making up 58% of festive-period sales as shoppers leaned towards at-home celebrations.

Despite a surge in Black Friday sales, the T&D sector struggled to reverse a disappointing year. Growth in IT (up 7%), major domestic appliances (up 10%), and small appliances (up 9%) failed to counterbalance the telecoms segment's negative growth of 2% due to market saturation and slower smartphone upgrade cycles.

The 5G phone market stratification remains stark, with 4G phones now making up over 60% of unit sales and 5G devices being a luxury for most consumers.

In the fourth quarter, telecom prices dropped by 9% compared to the previous year, benefitting consumers from widespread discounting prompted by emerging Chinese brands.

Black Friday emerged as a highlight, with unit sales up by 12% and a sales value increase of 7% due to competitive discounts, although the percentage of heavily discounted sales decreased.

As 2024 draws to a close, Haeri remained cautiously optimistic.

“While there have been improvements in consumer sentiment, looming uncertainties, including potential VAT increases and volatility in global trade, present challenges ahead," Haeri said.

"Nevertheless, we believe that mainstream consumers will continue to adapt as economic conditions shift. Retailers that successfully balance providing value through promotions while tapping into premium market opportunities are likely to thrive going forward.”

BUSINESS REPORT