Retail Shines In December

Earlier predictions over a gloomy retail outlook for the festive season have been proven wrong, with December’s retail trade sales reaching an all-time record high of R123.9-billion.


Although this figure represents a nominal increase of 1.6% over the sales for December 2019, it was not sufficient to outstrip the effect of inflation. Considering the unprecedented disruption caused by the Covid-19 pandemic, most retailers would nevertheless have been quite pleased with a mere 1.3% year-on-year drop in the inflation-adjusted sales figure.


The extent of the slump induced by the pandemic is aptly illustrated by the halving of retail trade sales from March to April 2020. The recovery, however, has been fast and furious, with December’s retail sales a full 170% higher than the disaster in April.


Even the analysts at Moody’s, who are renowned for their pessimistic opinions on South Africa, have changed their outlook for the country’s retail sector from negative to stable.


Demand divergence

Scrutiny of the latest data on retail trade sales published by Statistics SA reveals a profound shift in consumer preferences between the 3rd and 4th quarters of 2020, with the categories for specialised food & beverages and clothing & textiles outperforming other retailers by a considerable margin.


In addition to a new-found divergence between the performances of different product categories, the changing retail landscape is also characterised by differences in the financial performances of major retail groups.


Some companies have recently issued warnings over lower headline earnings, whilst others, including Woolworths and Dis-Chem Pharmacies, have reported improved trading momentum during the second half of 2020, especially during November and December.


Group sales at Woolworths for the 26 weeks ended 27 December 2020 increased by 5.3% year-on-year, whilst online sales grew by 160%, boosted, inter alia, by the increase in the social audience of its Taste magazine to almost 400,000.


Dis-Chem has also reported a sound performance for the 22-week period to 2 February, boosted by consumer demand for preventative medicine. Retail revenue rose by 10.3%, with strong sales of healthcare, vitamins and chronic drugs. The company’s wholesale business performed even better, with revenue growth of 20%, boosted by orders from external customers like private hospitals and pharmacies.


New challenges for retail

Some of the changes to consumer behaviour induced by Covid-19 are bound to linger on well into the future and will necessitate a new approach towards retail operations. Companies that engage in considered action to analyse macro-economic and customer data and take steps to stimulate trade via novel marketing strategies, especially via online capabilities, will almost certainly outperform their peers.


Other key challenges facing retailers include the management of inventory levels, which has become more difficult during the pandemic, as well as the location of their stores.



Results of companies involved in the commercial property sector also indicate mixed results. As consumer tastes and preferences keep changing during and after the pandemic, future survival in this sector will to a large extent depend on achieving the right balance in tenant mix.

By now, property developers would have taken note of the growing demand for commercial space in some rural areas and townships. The middle-class population continues to increase in townships and local retail outlets have a huge advantage through lower transport costs, time-saving and more convenient shopping hours.

This trend has been echoed in a recent trading update from Dis-Chem, which saw a significant recovery in many of its older stores located in regional malls. These trends suggest exciting opportunities for property redevelopment in 2021 and beyond.



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