Consumer strain is reflected in smaller shopping baskets, greater reliance on credit and loyalty cards and a reduced loyalty to retailers. 

In its most recent retail trade sales report, Statistics South Africa said food, beverages and tobacco sales were down 5.5% year on year, with clothing the only bright side in otherwise dismal retail sales. 

South Africa’s retail trade shrank in real terms by 1.4% YoY in May, marking the sixth consecutive month of lower YoY retail activity. 

The funk’s not expected to improve much when the agency releases its latest data on Wednesday, 16 August.

To unpack how four of the segments – students, mass credit, middle market and heavy hitters – feel about retail, their shopping behaviour and loyalty programme use, Eighty20, a consumer strategy, analytics and research business, has released its latest retail market report, against the backdrop of high interest rates, inflation and rolling blackouts, which are putting more pressure on consumers and resulting in a sharp uptick in credit defaults. Eighty20’s MAPS Portal surveys more than 20,000 respondents in South Africa. 

Over the past six months, credit providers have seen a worrying increase in defaults for home loans and vehicle and asset finance (VAF), which together account for more than 70% of total loan balances.

Read more in Daily Maverick: Nedbank leery of loan default risks despite higher interest rates hauling in the bacon

Students and pupils

There are close to eight million people in this segment, who are responsible for about R82-billion in annual expenditure. Their average age is 18, with a personal income of just over R2,100 per month. This segment has little credit – mainly retail and unsecured – with the rate of new defaults double the overall population. 

With fewer responsibilities and expenses this segment is not feeling as much pressure as their older counterparts. They prefer in-store shopping as opposed to online deals. In terms of loyalty programmes, Seattle Coffee’s a winner because it requires little effort and spending per unit is low.

Mass credit

About 10 million people in this segment are responsible for about R637-billion in annual expenditure, says Eighty20. The typical person in this segment is aged 36, with a personal monthly income of just over R5,175. About 80% of them have retail store accounts and 17% have a credit card. 

This is a segment in survival mode, the consultancy says, as they are shopping less frequently and opting for bulk deals – with the latter heavily affected by rolling blackouts. They are downgrading brands and choosing cheaper options.

The mass credit market is less loyal to retailers because they chase the best deal, visit malls less frequently and focus on comparative shopping. 

Loyalty programmes play a big role in their shopping behaviour, with this segment signing up for numerous cards, as these programmes offer relief at the till point.

Middle class

The middle-class segment comprises around four million people, who spend about R754-billion annually. Their average age is 40 and they have a personal income of around R14,591 per month, with a household income of nearly R25,000.

This segment holds about 30% of all home and vehicle and finance loans in the country, but only 20% by value. This segment is under significant financial and safety pressure. They do more online shopping, for convenience, and they are opting for smaller baskets, fewer luxuries and more essentials. 

Again, rolling blackouts play a big role in their product choices. Online shopping is viewed as more convenient as they don’t need to leave home, and they are getting the best deals which save them both time and money. Pick n Pay Smart Shopper, Checkers Xtra Savings and other loyalty programmes are their preferred programmes – especially where linked to fuel partnerships.

Heavy hitters 

There are close to 3 million people in this segment, who are responsible for about R1.5-trillion in annual expenditure. This segment makes up SA’s wealthiest 5%: Two-thirds of them are families, with an average age of 44 and personal income of R45,512 per month. This segment holds more than half of all home loans and VAF; but 76% of home loans and 69% of VAF by value. Growth in credit products among this segment has been low at 11% YoY. The heavy hitters are more conscious about how they spend and are planning and budgeting their expenses. They prioritise groceries, with luxuries or treats coming second, and view big shopping centres as a temptation, best for visiting during end-of-season sales and for entertainment. They also like loyalty programmes that combine retail and fuel. 

Steve Burnstone, CEO at Eighty20, said the current economic landscape has clearly affected basket size and the frequency of shopping trips and has sharpened focus on prioritising essential grocery items. “Comparative shopping and bargain hunting is driving a lot of retail behaviour at the moment, with retailers needing to be smart with their promotions, ranging and online presence to attract additional and retain existing spend.”

Beyond specials

Against this backdrop, retailers are spotting opportunities to lure customers into their stores with value-for-money offerings that go beyond regular specials.

On 9 August, Game announced it would offer select dry grocery staples and toiletries at wholesale prices.

One such special includes a 410g tin of Rhodes Baked Beans that now sells for R9.99 and a 2l bottle of Sunfoil Sunflower Oil for R62.99. 

The iGroza deals will be available in all Game stores year-round, with new deals introduced every two weeks.

The retailer has also partnered with OneCart, the on-demand grocery delivery service, to deliver from selected Game stores within an hour. DM