In Brief
- August data indicates that spending for most retail sectors is on the decline, highlighting potential shifts in consumer behaviour.
- Despite the growth in online shopping, in-store sales continue to play a significant role in retail performance.
- Data suggests that retailers with strong in-store and online channels may be outperforming those focusing on a single channel.
- We explore how an omnichannel approach could drive the competitive advantage needed to dominate online-only entrants.
August brought notable shifts in consumer spending across retail categories. Our latest data reveals declines in most sectors, with intriguing exceptions that warrant a closer look.
Growth in Spend per Category
Virtually all retail categories (eating out, general merchandise, groceries, media and pharmacy) experienced a drop in sales growth YoY from August 2023 to August 2024. Apparel is the notable exception: Despite being the worst-performing in total growth year-over-year, it was the only category to maintain stable spending over the period.
Media spending saw a significant drop, from the highest growth in 2023 to the second lowest in 2024. The steep drop could indicate a shift in South Africa’s media consumption, potentially reflecting dramatic declines in media subscriptions like DStv, and increased adoption of free social media platforms.
Inflation and economic pressure could also be causing consumers to cut back on discretionary spending in categories like eating out and media. It’s certainly why consumers and retailers alike will be delighted by the Reserve Bank’s September 2024 interest rate cut of 25 basis points and also tracks with the trend of living essentials such as groceries seeing the most growth in spending.
The challenge for retailers will be to adapt to these changes in consumer behaviour while seeking growth. And this could be where the omnichannel approach becomes vital…
The Omnichannel Advantage
Omnichannel retailing refers to providing a seamless shopping experience across both online and offline channels. It endeavours to meet consumers where they are, which in the pandemic and immediate aftermath was definitely online and at home.
However, four years on, and with numerous online-only players entering the scene, there’s reason to believe that the physical store is not dead. It could even be a vital element in making e-commerce truly viable.
Data shows that retailers like Checkers, Bash and increasingly Woolworths, which all have strong online and in-store offerings, outperform competitors.
When comparing grocery in-store versus online growth in market share over the past year, delivery outpaced in-store. But zero in on just the last 3 months and you’ll see that in-store gained almost 3X market share compared to delivery in the short term.
Market Share: Grocery In-Store VS Online
While Delivery has certainly seen the most growth over 12 months, look at In-Store (in green); it saw the most growth over the most recent 3 months – the physical store remains a strong and vital part of retail.
And let’s not forget that in-store still accounts for the lion's share of the overall market in South Africa – 67% versus online’s 11% – meaning that if you’re strong in-store, you likely have the continued income and ability to invest in developing your e-commerce business.
Plays in Grocery Retail
Looking at traditional retail, with Checkers and Woolworths' market share on a slow, long-term downward dip, it's Pick n Pay that’s falling behind. The group's multiple recent store closures could highlight the impact of sacrificing brick-and-mortar channels.
That said, Pick n Pay Group seems to be making a strategic shift – listing its Boxer stores separately from PnP on the JSE later this year. We’ve shown in the past that Boxer managed to claim a 9% share of spending among lower income brackets – the vast majority in SA.
Woolworths, on the other hand, is experiencing such growth online, it’s augmenting its solid online and physical presence by opening dark stores, aimed at serving online sales without disrupting stock levels and the experience for shoppers in-store.
Checkers had also opened a dark store back in 2022 for similar reasons.
The Picture in Food Delivery
The trend of physical boosting online becomes even more pronounced when you look at the on-demand and food delivery segments. Those with both online and physical presences – Checkers Sixty60, PnP asap! and Woolworths Dash – outperform virtual-only services like Mr D and Uber Eats.
Market Share: On-Demand & Food Delivery
Indeed, our data shows that Uber Eats’s Average Transaction Value variable remains relatively consistent if not climbing, meaning that a market share decline is likely due to losing customers.
Big Omnichannel Wins in Apparel
When it comes to truly maximising the potential of omnichannel, few brands can compete with the customer experience of TFG’s Bash. The level of online-instore integration is phenomenal – while shopping for jewellery, clothing or accessories in any of the 3’000 stores, if an item you like is out of stock or not in your size, you simply jump on the app and get it sourced processed and delivered for you by the time you get home, and vice versa.
Earlier this year, Bash became SA’s top fashion and lifestyle app, reportedly leading to a 45% increase in first-time shoppers and a 22% increase in online retail turnover.
The approach of using online to augment in-store enabled Bash to hold market share against newcomer Temu, who came in to capture around 20%. In fact, Bash seems to have marginally gained market share, while Shein’s dropped significantly – indicating Temu and Bash both gained on it.
In fact, SA online-only Superbalist declined by almost 10% YoY.
Apparel Market Share: 3 Month, Per Income Group
After seeing its online apparel market share decline from 27.69% in August 2023 to 18.13% in August 2024, Takealot has decided to sell Superbalist to a PE consortium.
In a year where they lost market share to Temu, Shein and Bash, Superbalist has also seen their average transaction size decrease from R1’042 to R1’016 (that's excluding the impact of inflation) while also seeing a dip in transactions per user.
At the same time, Shein’s response to Temu’s arrival was to set up a physical pop store in Mall of Africa in August. This should send a clear message to SA retailers that their best defense against competitive newcomers is their physical store presence.
Additional Insights for Competitive Omnichannel
- Customers today require more than just transactions. Online channels need to augment and amplify in-store and vice versa, which requires a carefully considered, advanced and truly cohesive approach centred around the customer’s experience – see Samsung’s guide to using mobile empower retail.
- A big part of this is for retailers to start distinguishing between the Point of Sale (designated checkout position) and the Point of Purchase (POP), where exactly the customer is when they decide to make a purchasing decision. To see how this might affect your omnichannel decisions, consider this helpful guide to POP.
These intertwining narratives and others reshape South Africa's retail landscape. Understanding and adapting to these changes will be crucial for success in the coming months.
As always, we're here to provide competitive data insights and analysis to help you navigate South Africa's dynamic retail landscape
If you have any questions or are interested in purchasing access to our Market Performance Dashboards don't hesitate to reach out.
Here's to your prosperous Q3!
