Real Estate Investor Magazine South Africa July 2018 | Page 40

RETAIL year more and more consumers are tightening their belts. While April technically falls in Q2, the Broll retail report highlights the startling change in consumer spend which was witnessed just one month after Q1. Some commentators have even referred to it as the “April retail sales shock”. An infla- tion rate increase to 4.5% in April and a prime lending rate of 10% together with the VAT hike to 15% and Budget tax rate changes hit consumers hard in April. The inflation rate had reached a seven-year low of 3.8% in March. The jump in April’s rate impacted on price increases in three product categories in particular. Fuel (9%), Meat (9%) and Beer (8%) were hardest hit while Wine, Restaurants, Prima- ry and Secondary Education, Water and Other Services were rated among the top 10 highest price increases. Broll notes that year-on-year growth declined across almost all categories in April. Whether the positive sales growth of Q1 will continue to be eroded remains to be seen and Broll’s research team will track the long-term impact of the tax increases. What is indis- putable is that retailers will need to work smarter to maintain their existing customer base and more innovatively to attract new custom in a highly challenging economic environment. Retail Snapshot First quarter hints at downturn T he upswing in consumer confidence in the first three months of 2018 was a welcome change from the de- pressed environment which overshadowed the last quarter of 2018. “Ramaphoria”, unrealistic as it may have been, took the consumer confidence index from -8 in Q4 to +26 in Q1, with many retailers enjoying buoyant sales as a more positive political and economic outlook for the country took hold. However, it appears that the glow is not likely to last, according to Broll’s incisive SA Retail Snapshot for Q1 which is now available. With numerous South African shopping centres under its management, Broll is able to swiftly ascertain how and where consumers are spending. What is evident from its Q1 report is that some retail categories experienced marked changes in the first quarter. Consumers, likely anticipating the first VAT increase in 25 years from 1 April, helped to push March retail 38 JULY/AUGUST 2018 SA Real Estate Investor Magazine spend up strongly in the Department Store category for ex- ample, with General Dealers as a sub-category recording year- on-year growth of a whopping 25.4% as shoppers rushed to do bargain and bulk purchasing. The Easter long weekend, which started at the end of March 2018, also contributed to the high growth reflected within the Department Store category, while positive growth was seen in the Food Category. Consumers stocked up on essential as well as indulgent goods in anticipation of a lengthy and relaxing Easter break while others took leave over this period thus ben- efiting Food Services. By contrast however, Accessories, Jewellery and Watches as well as Entertainment all registered a drop in growth in Q1 which the Broll report ascribes to a possible reduction in luxu- ry and leisure spend amongst many shoppers. With household debt to disposable income standing at 71.2% at the end of last TECHNOLOGY IS PUSHING RETAIL BOUNDARIES There is no doubt that traditional brick-and-mortar shopping remains the backbone of the South Afri- can retail industry, but new ways of purchasing are fast becoming standard practice in retail markets around the world, says Malcolm Horne, CEO of Broll Property Group. While E-commerce is well-entrenched in the mar- ket globally and the use of mobile devices (M-com- merce) to conduct retail purchases is increasing steadily, A-commerce - also known as augmented commerce - is hovering in the wings, according to Broll’s research paper. Augmented commerce relates to retail that utilises augmented reality, enabling consumers to visualise products virtually in the real-world environment before purchasing. In general, South African consumers have yet to become more fully acquainted with these new retail practices, but local retailers need to keep up to speed if they don’t wish to be caught “sleeping on the retail watch”. The South African online shopping marketplace is still very much in its infancy but an increas- ing number of retailers are incorporating the convenience concept of “click-and- collect” into their businesses. Larger national retailers such as Dis-Chem, Clicks, Pick n Pay, Mr Price Group and Cotton On amongst others, now offer this con- venient shopping service to assist time-strapped consumers. It seems clear from Broll’s research that the practice of retail is destined to be increasingly dominated by technology. “Adapting and keeping abreast of this uncertain landscape is a challenge that retail- ers will need to embrace,” concludes Horne. A digital campaign for every pocket Reach out to potential investors today Contact us now: [email protected] [phone] SA Real E state Investor Magazine JULY/AUGUST 2018 39