Sector Overview: Retail -Soft Goods

The Stellar Rise Of E-Commerce

By Shumirai Chimombe

Retail is the third-largest sector with retail trade sales representing close to 20% of South Africa’s GDP. It is also the second largest employer after the government, making it a key factor in the country’s economy.

In its Retail Trade Sales Statistical Release for August 2024, StatsSA reported that retail trade sales increased by 3,0% in the three months ended August 2024 compared with the three months ended August 2023. The largest contributors to this increase were general dealers (4,8%, contributing 2,1 percentage points) and retailers in textiles, clothing, footwear and leather goods representing 3,7% and contributing 0,6% of a percentage point.

Seasonally adjusted retail trade sales increased by 1,4% in the three months ended August 2024 compared with the previous three months. The largest contributors to the increase were retailers in textiles, clothing, footwear and leather goods with 4,6% and contributing 0,8 of a percentage point.

According to the Clothing Industry in South Africa 2023 report by Research and Markets, the clothing industry has shown resilience in the face of rising inflation, pressure on disposable income and global supply chain challenges. Retailers are focusing on local manufacturing to bring prices down and shorten lead times to bring fashion to the market.

The government regards the clothing and textile sector as a strategic industry. Due to their labour-absorbing character with a potential for significant job creation, the textile, clothing, footwear, leather and general goods sectors remain a priority for the government, and it has introduced initiatives aimed at improving domestic textile products, processes, and delivery efficiencies.

The opportunities for growth of the sector include a growing youth population that ensures high demand for clothing. The growth in online shopping means new companies are able to sell online without having a store presence. The sector presents low barriers to entry for designers and entrepreneurs which presents the potential to create jobs.

Digital Transformation: The Rise Of E-Commerce And Omnichannel Presence

The COVID-19 pandemic was instrumental in accelerating the shift towards digital platforms, resulting in e-commerce becoming a primary channel rather than a supplementary one. This has led to a profound transformation in the retail sector as traditional retailers have had to invest heavily in digital infrastructure and develop strong omnichannel strategies to stay relevant and competitive.

Omnichannel strategies involve having an integrated approach to create a seamless, personalised experience for the customer across all the brand’s touchpoints, including in-store, online, and mobile. This allows customers to start their shopping journey on one platform and complete it on another.

According to the firm Malander Advisory, digital and e-commerce now account for approximately 10.5% of total retail sales, up from 8.3% in 2023. Research by KLA reveals a significant surge in click-and-collect shopping, with 37% opting for online orders and in-store pickups.

The Online Retail Report South Africa 2024 by World Wide Worx, in partnership with Mastercard, Peach Payments, and Ask Afrika has revealed significant growth in South Africa’s online retail sector, which surged to R71-billion in 2023. This remarkable growth represents a 29% increase from 2022, positioning the sector to surpass the R100 billion mark by 2026 and approaching the 10% mark of total retail.

This comes after 35% growth the previous year took the total to R55-billion in 2022. “Whereas the boom in sales two years ago could be attributable to what was termed the “pandemic dividend”, brought about by a massive demand for home deliveries beginning in 2020, the ongoing rise was driven by competitive e-commerce strategies from most major physical retailers, existing e-shoppers moving more of their traditional shopping to the online space, and credit card payment processing becoming more streamlined’, wrote Arthur Goldstuck, CEO of World Wide Worx.

Sustainability And Ethical Shopping: Shifts In Consumer Preferences

South African consumers are increasingly environmentally conscious resulting in growing demand for sustainable products and ethical and green business practices. This is influencing their shopping habits and their choices of which retailers to support. Retailers are responding by adopting eco-friendly practices, such as reducing plastic use, sourcing sustainable products, and supporting local suppliers. This trend not only appeals to environmentally conscious shoppers but it also presents opportunities for retailers to differentiate themselves in a competitive market.

Advanced Payment Solutions: More Seamless And Secure Ways To Pay

Cashless and contactless payments, mobile wallets and mobile app-enabled payments such as QR codes - these innovations have transformed retail transactions, bringing unprecedented convenience for customers. This has also led to faster transaction speeds and dramatically improved efficiency both online and in-store retail.

Important Factors To The Success Of Online Retail

• Customer service - 73,9%

• Stock availability - 54,8%

• Wide range of products/quality of product - 44,7%

• Competitive pricing - 25,1%

• Personalisation of offer - 21,1%

• Wide range of payment options - 18,1%

• Wide range of delivery options and speed delivery - 9,1%

• None of these - 5%

Source: Online Retail Report South Africa 2024, World Wide Worx

Personalised Shopping Experiences: Leveraging Data Analytics And AI

Thanks to the advent of big data and AI, retailers can now offer highly personalised shopping experiences. By analysing customer data, businesses can tailor their marketing strategies, product recommendations, and promotions to individual preferences. This personalisation increases customer satisfaction and drives repeat purchases, reports DHL’s Retail Trends in South Africa.

Retailers are using data analytics to understand consumer behaviour and predict trends; to manage inventory more effectively; to ensure that popular products are always in stock; and to improve their pricing strategies. This ensures that they can continue to have a competitive edge on the retail landscape.

Fashion In South Africa

• Revenue in the fashion market is projected to reach $885.70-million in 2024

• Revenue is expected to show an annual growth rate (CAGR 2024-2029) of 11.43%, resulting in a projected market volume of $1.52-billion by 2029

• With a projected market volume of $236.80-billion in 2024, most revenue is generated by China

• The number of users is expected to amount to 10.7 million by 2029

• User penetration will be 14.3% in 2024 and is expected to hit 17.1% by 2029

• The average revenue per user (ARPU) is expected to amount to$125.90

Source: Statista

Customer Service - A Key Driver Of Customer Loyalty

According to World Wide Worx there is a clear hierarchy of factors that consumers consider crucial to the success of online retail activities. Customer service emerges as the preeminent factor, valued by nearly three-quarters of respondents (73,9%). This indicates that effective communication, prompt responses, and resolution of issues are likely perceived as essential components of a positive online shopping experience. The emphasis on customer service underscores its role in building trust and loyalty, which are critical in the competitive online marketplace.

Opportunities For Traditional Banks In An Evolving Customer Landscape

• Revenue in the retail delivery market in South Africa is projected to reach $852 million in 2024

• It is expected to show an annual growth rate (CAGR 2024-2029) of 11.16%, resulting in a projected market volume of $1.45 billion by 2029

• By 2029, the number of users in the retail delivery market is expected to amount to 6.5 million users

• The user penetration in 2024 is estimated to be 7.8% and is expected to increase to 10.1% by 2029

• The average revenue per user (ARPU) is projected to be $178.20

• The rise of e-commerce platforms in South Africa has revolutionised the retail delivery market, offering convenience and a wider range of products to consumers

Source: Statista

Sources: Stats SA | Research and Markets | Labour Research Service (LRS) | World Wide Worx | South African | Business Integrator | Malander Advisory | DHL Retail Trends in South Africa | Businesswire