Price hikes see SA consumers buying less – and doing all their shopping under one roof

Business Insider SA
(Getty Images)
(Getty Images)
  • Cash-strapped South Africans are scaling down amid inflation reaching 13-year highs.
  • Consumers are buying less, and that's having a negative impact on almost all retail segments, according to new research from the Bureau of Market Research (BMR).
  • General dealers, defined as any retailer that sells a variety of product classes under one roof, have proven to be the most resilient, with sales growing by 14.6%, in real terms, this year.
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Cash-strapped South Africans are tightening their belts, and when they do go shopping, they want to get all their goods from a single store, according to new research conducted by the Bureau of Market Research (BMR).

Rising inflation is hitting consumers' pockets. South Africa's annual consumer inflation surged to 7.4% in June, its highest level in 13 years and far above the Reserve Bank's target range of between 4% to 6%.

Price increases have been noticed across the board, compounded by fuel costs which have skyrocketed by more than 50% over the past year. The price of food and non-alcoholic beverages has increased by 8.6%, while bread and cereal products are 11.2% more expensive than they were a year ago. Prices for oils and fats have ballooned by a third.

See also | Inflation is rocketing – especially if you eat bread or drive a car

These increases have changed consumer habits in 2022, with households on a tighter budget buying less. This, in turn, has put retailers under pressure, according to the BMR research conducted on behalf of Capital Connect.

Over the past year, retailers of food, beverages, and tobacco in specialised stores saw sales decline by 5.6%, according to BMR's research. Retailers in pharmaceutical and medical goods, cosmetics and toiletries saw sales dip by 0.3%, while those in textiles, clothing, footwear and leather goods experienced a decline of 4%. Sales of household furniture, appliances and equipment were down 0.3%, and retailers in hardware, paint and glass fell 6.8% in real terms.

"With inflation at 13-year highs, the Reserve Bank hiking interest rates by 0.75 basis points, low economic growth and high joblessness, the consumer is under enormous pressure," said Professor Carel van Aardt, research director at the BMR, in a statement on Monday.

"This, in turn, puts retailers under pressure, with consumers needing to allocate most of their monthly income to the bare necessities."

One of the only retail segments to show growth in 2022 and over the past year has been general dealers, defined as any retailer that sells a variety of product classes, from food, to linen, stationery, and medicines, all under one roof.

"That includes big general dealers like Shoprite, Pick n Pay, Spar, all the way down to very small general dealers like spaza shops selling products from different product classes in informal areas. This will also include corner shops selling a wide variety of goods from different product classes," Capital Connect told Business Insider SA.

Between January and May 2022, general dealers grew sales by 14.6% in real terms, according to the BMR, with consumers choosing entry-level and in-house brands over premium brands. "Stocking up on new low-cost ranges and brands to cater for struggling consumers who are buying or scaling down" is one of the tactics suggested by Capital Connect to retailers amid rising inflation.

"When consumers feel the pinch, retailers feel it, too. Weak retail sales are seeing some stores close down or scale back operations," said Steven Heilbron, CEO of Capital Connect.

"Retailers face the competing imperatives of growing their businesses and keeping their costs as low as possible. Yet it's also encouraging to see how retailers are innovating and diversifying in the face of a challenging operating environment."

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