As the landscape of retail in South Africa transforms, businesses must adapt to the stabilized growth of online sales and the rising demand for convenience and personalization in shopping.
In a developing landscape for retail in South Africa, growth in pure online sales has stabilized, leading to an increasingly interconnected shopping environment where consumers engage across both digital and physical platforms. This evolving omnichannel world is expected to continue shaping the shopping experience until at least 2025. Key insights from Zak Haeri, Managing Director of NIQ South Africa, underscore the pressing need for retailers to adapt their strategies to accommodate the demand for convenience, accessibility, and affordability.
As online sales for consumer technology and durable goods have reached a plateau at elevated levels, retailers are urged to focus on delivering a seamless omnichannel experience. NIQ’s tracking indicates that online sales, particularly in the Middle East and Africa, currently hold a 19% share in the consumer technology sector, with an upward trend observed in categories like groceries.
To maintain sales growth, it is essential for retailers to provide a consistent experience across all platforms while harnessing digital data for personalized marketing. This includes utilizing tailored messaging, product recommendations, and promotions that resonate with consumers. “Winners will increasingly differentiate themselves by not only using data in tactical campaigns but also using cross-channel insights to predict future trends and customer behaviour,” Haeri noted.
Retail Media Networks (RMNs) are emerging as a lucrative revenue stream, as retailers like Amazon, Takealot, Pick n Pay, and Checkers monetize product placement ads on various platforms. According to McKinsey, retail media could increase enterprise values in the U.S. by USD$1.3 trillion by 2026, with profit margins ranging from 50% to 70%. As a result, manufacturers and distributors are encouraged to maximize their advertising investments on these networks to ensure high returns.
Marketplaces are becoming increasingly influential, with large e-commerce platforms generating significant income through fees and commissions from retailers and brands utilizing their platforms. Data illustrates that consumers globally spent USD$3.25 trillion on the top 100 marketplaces in 2022, and as South Africa’s market continues to evolve, platforms like Amazon are poised to gain traction in alignment with global trends.
Chinese e-commerce giants Temu and Shein have made significant inroads into the South African retail sector, especially in the clothing and beauty categories. Their competitive pricing strategies have garnered consumer loyalty, even as domestic competitors raise concerns about their compliance with VAT and duty regulations. The South African Revenue Service is expected to bolster enforcement of these import taxes, which could influence the operational strategies of these imports, but their established customer bases may help them navigate potential challenges.
Generative AI technology is identified as a driving force for innovation within retail operations, allowing companies to quickly generate creative assets such as videos and images. However, the adaptation of this technology also brings challenges, as consumers have expressed a tendency to find AI-generated content less engaging compared to traditional advertising methods. Most retailers are anticipated to navigate the balance between efficiency and maintaining a human touch in their marketing strategies.
Social commerce is on the rise, showing promise for growth with a market size expected to expand from USD$0.62 trillion in 2021 to an estimated USD$7.03 trillion by 2030. Platforms such as TikTok are especially influential in boosting engagement, particularly in sectors like health and beauty. As South African consumers turn to social media for product discovery, brands are presented with opportunities to enhance convenience and spontaneous purchasing behavior.
In this competitive retail environment, the challenge remains for manufacturers and retailers to provide a frictionless customer experience across all engagement platforms. The development of a robust omnichannel strategy focused on leveraging data and emerging technologies is essential in meeting customer expectations and enhancing overall satisfaction. For further insights, retailers and stakeholders are encouraged to explore resources available at NIQ’s website and social media channels.
Source: Noah Wire Services
