Understanding our operating environment

Food retailers in South Africa are less exposed to competition from international brands and online trends than clothing and general retail.

Growth in the informal traders’ market, however, is a much more significant concern. Lower-income groups are particularly attracted by price competition from informal traders who do not adhere to the same cost and legal structures as formal retailers such as SPAR. Lower-income groups are also more vulnerable to economic vagaries in sectors such a mining and motor manufacturing, which result in retrenchments, continued unemployment, low disposable income and labour unrest.

Food inflation

has been decreasing, but remains high compared to other territories. Deflation in commodity prices has been most evident as the supply and demand situation normalised following drought conditions in the previous year.

Shopping patterns

continue to favour month-end peaks, with mid-month shopping under pressure.

The home building industry

is under increasing pressure as lower numbers of home building plans are approved and cash-strapped consumers opt for maintenance and renovations rather than building projects.

Consumer confidence

remains subdued, even in higher-income groups, with a perceived tendency to cut back on discretionary expenses, or defer spending in favour of servicing debt.

Where neighbouring territories provided healthy and growing demand in the past, most of these countries have come under pressure as well as they fight their own battles with liquidity, commodity cycles, political uncertainty and low growth scenarios.