SA 'spending more wisely'
Jan 21 2009
Retail Wrap >>

Two of the country's biggest retailers, Pick n Pay and Woolworths say that consumers are still buying, but are more careful with how they spend their money. "We are amazed at how resilient the consumer has been," Pick n Pay's financial director Dennis Cope told Fin24.com. 

South African retailers, like their international counterparts, have had to weather a difficult year, with the local sector officially entering recession in November following two consecutive quarters of negative growth, according to Statistics South Africa.

Profits at retailers of clothing and furniture have been hardest hit.

Consumers have not stopped spending altogether, and instead are becoming more discerning.

Woolworths reports that customers are increasingly favouring more affordable product at Woolworths. Anticipating this focus on 'value', Woolworths has sharpened prices considerably in core categories. Woolworths said that in its clothing division, prices rose by an average of 7.3% for the financial year, down from a high of 9.6% at the half year. This is indicative of the stronger focus on value, especially at opening price points.

Pick n Pay's Cope noted that sales in some of the retailer's clothing and general merchandise lines were flat, with consumers "behaving in a far more savvy fashion". "Customers have been purchasing gift items which in some cases have a dual purpose. Lines such as character-branded toiletries have shown growth, and parents bought back-to-school necessities as gifts."

Consumers in some areas are taking more time and trouble to look at unit price and pack sizes, says Cope. "Our shelf labels show the unit price per kilogram, and smaller packs are sometimes cheaper than large packs, which is counter-intuitive to some. Customers are being wiser and sometimes buying less quantity rather than 'trading down'."

Retailers say there's also evidence that South Africans who would travel abroad for the holidays opted to stay home: "More people have stayed in Johannesburg and Pretoria than in past festive seasons. We sold many more braai accessories, outdoor games, pool accessories and much more meat than previous years, indicating that people stay at home more." Also, stores were busier than expected two or three days before Christmas, "which may point to people taking their holidays later or making their holidays a bit shorter".

Both Woolworths and Pick n Pay say there are early indications that the consumers' financial situation could improve in 2009.

Adapted from Source: www.fastmoving.co.za, 6 January 2009