CAPE TOWN – The news of international toys retailer Hamleys being placed in business rescue in South Africa not too long after opening its doors places the spotlight on the real struggle of the local retail sector.
This follows on the news of international food brands such as Dunkin Donuts and Baskin Robbins falling on hard times in the South African market.
Andrew Bahlmann, the managing director of Deal Leaders Africa, said not that it was any rosier elsewhere. But the South African economy was quite unique, he said.
“You cannot just plug and play certain big international brands into this environment.
"Aggressive growth on paper always sounds good, but you actually have to execute it and overlay that with the pressure on the average consumer.”
Bahlmann is of the view that some of the newcomers to the local market got their strategies wrong and their business models were not funded correctly.
“As soon as there is market pressure on the consumer and retail spending slows down, you still have to service that debt. In many cases I think the business case was too bullish.”
Statistics SA last month published the year-on-year retail growth figures for 2018 which came in at 2.1 percent compared to 3.1 percent in 2017. Although the annual growth rate for 2018 got off to a good start of 4.7 percent in the first quarter, it fell to just 1.8 percent in the second quarter and 1.5percent in the third. In the fourth quarter it was at 1 percent.
Leading clothing, footwear and textiles retailing group Edcon is restructuring its business in order to stay afloat.
Bahlmann said the days of sheer scale were gone.
“Retailers are looking at a combination of their retail footprint, online strategies and getting the mix right.
"They have to go back to understand what the average consumer is looking for, and sometimes it is just about getting back to basics – do less and do it well.”
Bahlmann said there was a need for a new era of consumerism. Consumers were evolving and businesses could not only rely on a brand or retail footprint.
He said South Africa still had a retail-focused economy and although online was gaining traction worldwide, it was still very small in South Africa. Retailers should take note and consider moving away from these “palatial stores” and deliver what the consumer wants.
Jeremy Gardiner, a director at Investec Asset Management, recently told an investor and asset manager session in Pretoria that although South Africa was “digitally behind”, online spending has tripled over the past five years, going from R5.7 billion to R18bn.
In the UK 19 percent of retail shopping was done online, in Germany it was 17 percent, France 14 percent, in the US 10 percent and Australia 7 percent. In South Africa it was 1.8 percent.
There were massive opportunities to grow online sales, he said.
Bahlmann said within the economy there were certain sectors that were doing very well.
“We as South Africans are very pessimistic – it is actually quite schizophrenic - because we are damn resilient as well.”