SA retail sales trends H1’24

South African consumers have spent R303 billion on fast-moving consumer goods in the first half of the year, marking a 3 per cent increase from the previous comparable period. However, this growth has been mainly driven by price increases, as actual sales volumes across most FMCG categories have declined, according to the latest NIQ State of the Retail Nation report. Kelly Mac Innes, Market Insights Lead for Sub Saharan Africa at NIQ, shed light on the challenges South African consumers are facing in the retail market. As the economy grapples with recovery and limited disposable income, consumers are forced to make tough decisions which are reflected in their purchasing patterns. Essential products like food are experiencing higher growth rates, fueled by the increasing prices of necessities. Volumetrically, however, these categories are starting to show slowdowns. In the first quarter of the year, there was more growth across categories, but there has been a stabilization in sectors such as snacks and alcoholic beverages, indicating a shift in consumer behavior. Manufacturers and retailers have teamed up to offer promotional deals to consumers to drive growth, as shoppers are increasingly seeking out discounts and deals in the current price-sensitive market. Moreover, the report mentions that the private label market may have reached a saturation point due to the increasing availability of both premium and economy offerings within that space. Retailers are now tasked with devising strategies to cater to both price-sensitive consumers and those preferring premium products. Successful retailers have introduced different brands to target varying consumer segments, ensuring affordability and quality offerings for all. The rise of online sales continues to reshape the retail landscape, with significant growth seen in the tech and durable goods category. Consumers are increasingly purchasing tech and durable items online, a behavior shift that was previously less common. However, with the emergence of international online retailers like Shein and Amazon, there is an added pressure on local online sellers to compete. The potential impact of the 'Shein effect' and 'Amazon effect' on local retailers remains to be seen. A reduction in interest rates in the second half of the year could potentially stimulate volume growth in FMCG categories, allowing consumers to resume purchasing essential goods they had previously pulled back from due to financial constraints. As the market navigates these challenges, strategic moves by retailers and manufacturers will be crucial in adapting to changing consumer preferences and economic conditions.