Report suggests that retailers may not see a cheerful season this festive

South African retailers are experiencing a surge in confidence, yet economists remain cautious about a prosperous festive season as 2023 concludes.

The latest BER Retail survey indicates a positive trend, with retailer satisfaction rising to 47 in the fourth quarter, the highest since 2022 Q3. This improvement is attributed to increased profitability and enhanced business conditions, especially with improvements in load shedding during the survey period, rather than substantial sales growth.

In the non-durable goods retail sector, encompassing products like food, beverages, groceries, cosmetics, and pharmaceuticals, respondents reported significantly lower sales volumes compared to the 2022 holiday season. The sector continues to face challenges with high purchasing and selling price inflation, although at a slower pace than in the first half of the year. The avian flu outbreak led to a surge in egg prices, disrupting the declining trend of food inflation observed in Q2 and Q3.

Durable goods retailers, including furniture and hardware sellers, experienced lower sales volumes compared to the previous year, although hardware sales showed improvement, particularly following a weak Q3 in 2023. The recovery in the building industry and repairs in the Western Cape post-September floods likely contributed to this uptick. Despite sustained high purchasing price inflation for durable goods due to the weak rand, there was a moderation in selling price inflation.

Black Friday sales were strategically employed to attract customers in a sector strained by high interest rates and cost-of-living pressures, as noted by Craig Lemboe, deputy director at the BER.

Semi-durable goods retailers, covering textiles, clothing, footwear, sporting equipment, and toys, reported positive volume growth over the Christmas period, making them the only sector to achieve higher sales volumes compared to the previous year. However, there was a decline relative to Q3 when Springbok-related merchandise boosted sales.

Clothing and footwear retailers cited port congestion, causing delays in the arrival of summer ranges, impacting sales during the summer holidays.

Overall, the BER’s survey suggests that retail sales may not see a cheerful season, given reduced purchasing power due to high inflation and interest rates. Economic conditions are anticipated to remain challenging in the trade sector during the first half of 2024.