South African retail boom

South African retailers have expanded their store footprint by 25% over the past five years, driven by improved economic conditions and evolving consumer trends.

A recent Corporate Retail Comparative Report by Trade Intelligence examined key developments in the fast-moving consumer goods (FMCG) sector.

Trade Intelligence insights lead Andrea Slabber told Kaya Biz that retail sales volumes increased significantly in 2024, supported by a more favourable financial climate.

Inflation is at its lowest level in 14 years, interest rates have fallen, and consumer sentiment has improved.

These factors have made credit more accessible, and the introduction of the two-pot retirement system has provided additional money in South Africans’ pockets by allowing early access to pension savings.

As a result, consumers had more disposable income, fueling retail sector growth.

Despite these favourable conditions, economic pressures persist.

Slabber noted that 10% of South Africans across all income groups took out loans in the 2023/24 period to afford basic necessities like food.

While this indicates financial strain, it also underscores why discount retailers are thriving in the current environment.

Retailers have responded to these shifts by adjusting their expansion strategies. Instead of focusing on large-format stores, they are opening smaller, more conveniently located outlets.

Clicks, for example, has prioritised proximity to residential areas to enhance customer convenience. In its latest results, the pharmacy chain reported an 8.7% increase in retail sales, with overall sector sales volume rising by 2.4%.

Clicks alone opened 11 new stores in November and December 2024.

In addition, Shoprite, which owns Checkers, Usave, and Checkers Sixty60, dominates the grocery retail sector and continues to expand its store footprint year-on-year.

In the six months ended 29 December 2024, Shoprite reported a 9.6% rise in sales from continuing operations, reaching R128.6 billion.

The group experienced 12% turnover growth, with eCommerce turnover soaring by 58%.

In 2024, Shoprite opened 248 new stores, including 30 Shoprite outlets, 28 Usave stores, 34 Checkers locations, and 80 LiquorShop branches. Additionally, 76 new-format speciality stores were introduced to diversify the retailer’s offerings.

Discount retailers like Boxer and Usave are also capitalising on South Africa’s price-sensitive consumer base.

Boxer, which was recently unbundled from Pick n Pay, saw sales grow by 11%. Meanwhile, Pick n Pay’s overall retail sales declined by 0.4%, though its online segment grew impressively by 42.5% in the second half of 2024.

Retailers are also investing heavily in both physical and digital expansions.

For example, Woolworths and Checkers have introduced “dark stores” dedicated to fulfilling online grocery orders.

Checkers has also enhanced its in-store experience with its food service and deli sections, a concept Slabber referred to as “shoppertainment.”

Despite rapid expansion, Slabber believes the South African retail market is not yet oversaturated.

Many of the newly opened stores cater to previously underserved areas, creating fresh demand. Furthermore, the shift to smaller stores allows for more targeted product offerings, enhancing the efficiency and reach of retail networks.

The combination of economic shifts, evolving consumer habits, and strategic retail adaptations suggests that South Africa’s retail sector is poised for continued transformation and growth in the coming years.