The evolution of South Africa’s (r)etail landscape – Insights from the Retail Industry Insights Conference 2022
South Africa’s retailers are facing a mixed bag of challenges. From a fragile national economy, to record high inflation, worsening unemployment, supply chain disruptions and the unpredictability of the country’s rolling blackouts, cash-strapped consumers are driving an evolution within the retail sector that is forcing many to innovate and differentiate in a bid to outlast the competition, remain relevant and accelerate their growth prospects. BDO attended the Retail Industry Insights Conference 2022 where industry experts discussed crucial insights for retailers on how to stay relevant, and profitable, in these uncertain times.
Relentlessly competitive, the retail sector faces innumerable external forces which are largely outside of its control, yet which impact dramatically on performance and strategy. Panelists and high-level keynote speakers addressed pertinent areas that retailers should be setting their sights on if they wish to change the future prospects of the sector as a whole.
The competitive landscape
As of October 2022, the average household in the country has experienced 459 hours of load shedding - more than the last eight years combined. Rolling blackouts have increased by 69% in 2022 vs 2021 .In the last quarter of so, the country has been hovering around stage 6 loadshedding. Moving from stage 6 to stage 4 loadshedding creates much excitements these days – real irony!! This has changed the way the country is shopping. It is estimated that 70% of shoppers are now shopping online, but what is also important to note is that outside of times of loadshedding, more volumes of shoppers are visiting brick and mortar stores.
What this tells us is that retailers must invest in their digital transformation to ensure that shoppers can enjoy a hybrid, or omnichannel shopping model that is designed to offer them a fully rounded experience that includes brick-and-mortar stores, online shopping, mobile browsing and anything that falls between these options.
Deal or no deal
The adoption of digital has brought with it an increasingly savvy market. With inflation sitting at a 13-year high, shoppers are doing their homework before spending their hard earned rands – some doing their price-checking then and there in the store, at the point of purchase. Shoppers are browsing brands and comparing prices in the quest for the best deal and if retailers can’t meet that price then they are not afraid to move on to ones that can.
To combat this, retailers must ensure that the customer experience is central to any retail strategy. Research has shown that value, convenience and a great shopping experience are increasingly important trends within the consumer mindset and that not all purchase decisions are based on price alone. Whilst consumers are becoming more value conscious, at the same time these shoppers are also seeking products which are in support of preserving the environment and invariably look to food manufacturers to provide environmentally friendly products and packaging.
Those that strive to give their customers an end-to-end experience could well beat out those that rely on lower pricing to seal the deal.
Buying loyalties
Over the years loyalty programmes have proven they're an effective way to drive customer retention but when presented with a sea of loyalty programmes that effectiveness is watered down considerably for shoppers.
Brands that offer programmes stretching across online and offline channels to solidify positive customer experiences by creating additional value will be more successful in leveraging customer loyalty. To create the ideal loyalty programme, brands should continuously keep a pulse on what their customers want by analysing customer data from the moment they sign up, to the moment that they can redeem a reward. If consumers build a connection to a brand because they feel the rewards are personal and add more value than a discounted deal for example, they are more likely to invest in the programme for the long-term.
The rise and rise of conscious consumers
The pandemic, although devastating, gave rise to a more socially conscious era of shoppers. For brands and retailers, environmental, social, and governance (ESG) investing must remain firmly planted on the retail agenda. Issues such as the move to reduce plastic shopping bags and other packaging reduction, addressing the gender pay gap, climate impact, a circular economy and corporate responsibility for supply chain management, to name but a few, has a huge impact on brand loyalty, product choices, and the bottom line.
ESG is certain to evolve from an expectation to a requirement. Retailers that are proactive at managing their ESG impact and establishing appropriate ESG reporting capabilities and initiatives will be better prepared to meet this challenge and retain their customers.
The retail landscape is becoming more and more a world where innovation, agility and a customer-centric approach must merge to meet the culturally and economically diverse consumer if they are to weather the perfect storm of challenges the sector is facing.