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Eating consumers push SA retailers to top spots

| Economic factors

South African retailers are increasingly adopting global trends and this creates a lot of potential opportunities for more agile operators that apply the industry’s global lessons to their local operations, according to Rob Latham, Deloitte consumer business digital leader.

South African retailers account for five of the top seven retailers in Africa and the Middle East that qualified for inclusion in Deloitte's list of the world’s 250 largest retailers.

According to the Deloitte Global Powers of Retailing survey for 2015, Shoprite Holdings was named the number one retailer in Africa and the Middle East followed by Steinhoff International and Pick n Pay with Spar Group claiming fifth place and Woolworths [JSE:WHL] coming in at number seven.

All the South African companies that featured in the survey experienced growth of more than 6%, ranging from 6.5% for Pick n Pay to 21.6% for Steinhoff.

Shoprite's 2013 retail revenue of $9 869m, putting it in 107th position on the global list of retailers.

Steinhoff was the second best performer in Africa and the Middle East with retail revenue of $8 217m and was also ranked the 8th fastest growing retailer in the world with a compound annual growth rate of 31.5% between 2008 and 2013.

“South Africa has certainly performed strongly from a regional perspective, which is testament to the ability of the country’s retailers to compete in what remains a very tough operating environment," said Stephan Botha, manager in Deloitte’s consumer practice in Johannesburg.

While Massmart Holdings is not singled out in the report, this is due to the results being incorporated in Wal-Mart Stores.

"If we considered Massmart in isolation they would rank third in the Africa and Middle East egion,” said Botha.

“Although the Africa and Middle East region is still fairly small in terms of its revenue contribution to the global retail universe, it is significant from a growth point of view.”

Turkey’s BIM Birlesik Magazalar was named in fourth spot, while Emke Group/Lulu Group International from the United Arab Emirates (UAE) was ranked the sixth biggest retailer in the Africa and Middle East region.

Deloitte’s survey analysed performance based on geographic region, product sector, e-commerce activity, and other factors.

This year’s report focused on 2015’s major retail trends as well as retailers’ ability to creatively utilise innovations to address the disruptive changes impacting their markets.

Regional trends

The Africa and Middle East region boasted the highest composite retail growth of all regions at 12.9% and its composite net profit margin of 4.7% led the industry.

Following the global trend, innovation has been key to the region’s growth as the increasing demands of Africa’s rising middle class and particularly youth, has led to the continent "leapfrogging" landline infrastructures in favour of mobile.

According the Deloitte Consumer Review Africa, it is projected that there will be 334 million smartphone connections by 2017 (the fastest telecoms growth globally) leading to a rapid adoption of e-commerce and digital technologies.

“Whilst the current economic situation is challenging for consumers, it remains that consumers have to eat and clothe themselves, which offers some insulation to retailers who are competing for consumers’ limited share of wallet,” said Latham.

“Steinhoff’s acquisition of Pepkor and kika-Leiner Group, a furniture retailer with 73 shops in Austria, Central and Eastern Europe, will put it in a prime position to challenge Shoprite for the top position in the Africa and Middle East region in future.”

Looking beyond Africa and the Middle East, Wal-Mart claimed top spot in the Deloitte survey with 2013 retail revenue of $476 294m followed by Costco Wholesale, Carrefour, Schwarz Unternehmens Treuhand KG and Tesco.

The combined revenue of the top 250 global retailers reached $4.4trn in fiscal year 2013, an average of more than $17.4bn per company.

General industry trends

- The fastest growing retail sector is apparel and accessories, with 5.8% composite revenue growth;

- Growth in “travel retailing” (retailing targeted at tourists) is driven by catering to high-spending travellers, who value the better prices and wider selection of luxury products abroad;

- “Mobile retailing” is quickly becoming a major retail platform, with mobile payments playing an increasingly important role, and technology such as wearables providing new opportunities for sales and engagement.

Wal-Mart, eBay and Amazon are playing well in this field;

- “Faster retailing” is all about retailers who respond first and the fastest to changing market dynamics and increasingly urgent consumer demands;

Retailers need to consider the immediate gratification preferred by millennials, increased customer expectations with regards to access to information narrowing delivery windows for products.

With Amazon and Google offering same-day delivery, other companies are expected to follow suit;

- “Experience retailing” focuses on making the process of shopping part of the total value offered to consumers. Convenience and personalisation of the customer shopping experience are the driving forces of this trend;

- “Innovative retailing” is all about adaptation and embracing change and is led by retailers such as Amazon’s Creative Expressions (being a blurred mix of retailer and producer), Warby Parker (with single product retailing of prescription glasses) and (with made-to-order direct from manufacturer products).

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