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The retail industry is coming under increasing pressure as consumers turn their pennies and think twice about the items they spend money on.
Trends in the retail, wholesale and car sales industry are often indicative of the demand for goods and if these sectors start to dip, it often points to restrictions on household spending, increased spending on other services such as restaurants, transport or property – or greater savings due to fears of a riskier financial environment, as seen at the time during the Covid-19 pandemic.
The Bureau of Economic Research’s (BER) trade survey for the first quarter shows a sector that is under increasing pressure and experiencing weak consumer demand.
Respondents in the retail sector are currently much less confident than they have been on average since 2009.
Confidence tumbled from 42% in the previous quarter to 34% in the first quarter of this year, putting retail confidence at 6% below the long-term average.
It is common to experience weaker sales in the first quarter – when compared to the festive season – but retailers are also expecting lower sales in the first quarter than at the same time last year, the BER’s survey found.
Statistics SA has already announced that retail sales in January were 0.8% lower than this time last year.
“Several factors are causing these trends. “Consumers are being squeezed by higher inflation, especially food prices that drag down the sales of non-durable goods and a higher interest rate that has an effect on the sales of durable goods,” says the report.
Consumer confidence is now at levels last seen during the Covid-19 pandemic and during last year’s devastating floods in KwaZulu-Natal. The effects of Russia’s invasion of Ukraine were also only beginning to show at that stage.
“Furthermore, retailers try to reduce the effects of load shedding by spending hard-earned revenue on backup power solutions.”
Also, more affluent consumers seem to invest in backup power instead, which then reduces their disposable income.
Food price inflation remains stubbornly high, but the BER says on a positive note that the price levels of other retail items may increase more slowly over time.
