South African retail sales figures proved to be better than expected over the Christmas period in food, clothing and textiles. While they were slightly lower in household goods, overall figures showed consumer confidence in the local economy was good. However, consumer confidence may be short lived.

The gains in sales in the food, clothing and general goods sectors are being attributed to a number of factors. One of these is the fact that many South Africans remained in the country over the holiday season as international travel has become too costly due to the rapid decline of the Rand.

Having said this, an influx of foreign visitors cashing in on the Rand's weak exchange rate has given a last minute boost to what was a flagging economy during 2001. This spike is expected to be short lived though as consumers' disposable income will come under increasing pressure in 2002. Consumers are expected to be cautious as the new year gets underway due to the rise in interest rates and expected price hikes that will hit their pockets.

Even though the government's proposed cut in taxes could potentially raise the level of disposable income among South Africans, this may be negated by expected price increases and inflation.

Ernst & Young forecasts increases of between 20% and 30% in the price of electronic goods towards the end of the first quarter, due to the increase in prices for imported goods.

Strategies to counteract the impending retail slowdown and plans to profit from price increases are beginning to show. This is indicated by trends towards downsizing already evident among retailers. One such trend is a reduction in floor space that improves trading densities and achieves a higher turnover per square metre for retailers.

However, accurate measurement of the retail industry in South Africa is required to produce meaningful benchmarks for retailers to design and implement effective strategies. This may even lead to extensive changes to retail strategies in 2002.

Source: Jaco van der Walt, Partner, Retail and Consumer Products, 011 772 3000

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