By Karen Keylock, National Manager: Retail and Franchise at Nedbank Business and Commercial Banking

South African consumers are still spending, but they are thinking harder about where every rand goes. Household budgets haven't collapsed but are under increasing pressure. For retailers, that means every basket needs to be earned, every promotion needs to work harder, and customer loyalty can no longer be taken for granted.

This was the message from my colleague Nedbank Chief Economist Nicky Weimar at the recent Nedbank-sponsored Trade Intelligence Retail Conference. The consumer is still in the market, but the relatively easy spending of the past 2 years is giving way to more deliberate choices.

For a while, households had some breathing room. Pay rose faster than prices, while lower interest rates eased the monthly burden for many consumers with home loans. That helped keep money moving through stores.

That environment is changing. Spending and income growth slowed in the first quarter of 2026, while employment has not improved as strongly as retailers would like. Some households have drawn on savings, including withdrawing from the two-pot retirement system, to support day-to-day spending. Others are borrowing more, with a growing share of that borrowing apparently taking place outside of the mainstream banking system.

The new retail battleground

When budgets are tight, shoppers rarely stop buying altogether; they change how they buy. They choose a smaller pack, wait for a promotion, switch brands, or leave non-essential items behind. They compare prices between retailers, notice whether the products they came for are actually on the shelf, whether delivery fees feel reasonable, and whether the shopping experience is worth their time. This places retailers under pressure from both sides.

Sales may increase in rand terms while customers buy fewer items. Promotions can drive footfall but erode margins. Too much stock ties up cash, and too little of the right stock sends customers elsewhere. Meanwhile, retailers are managing their own rising costs, from fuel and distribution to rent, wages and technology.

In this environment, returning to the basics can be a strategic decision. Retailers need to make value easy to understand, keep essential products available, and remove unnecessary friction from the customer experience. These are not particularly glamorous strategies, but when every rand matters, execution matters more than ever.

Breathing room, but not a free pass

Still, there are reasons for retailers to remain cautiously optimistic. A steadier rand has helped to moderate the cost of imported goods and fuel. It has not made the operating environment cheap, but it has eased some pressure on costs.

South Africa's credit story has also improved. S&P Global Ratings upgraded the country's rating in late 2025, followed by Fitch in June this year. South Africa remains below investment grade, so there is little room for complacency. But the upgrades reflect progress on public finances and reforms in areas such as energy and logistics. For retailers, these developments matter because a more stable macroeconomic environment creates greater certainty for planning and investment.

But this is breathing room, not a return to business as usual, and the retailers that will benefit most will be the ones that use this period to strengthen their proposition, improve productivity, and prepare for the next phase of consumer growth.

Growth doesn't mean just more stores

In a constrained consumer environment, retailers also need to think differently about where growth comes from. Opening more stores may make sense for some businesses, but there is also significant opportunity in getting more value from established customers and assets.

Retail media is one example. Retailers can use their understanding of shopping behaviour to help suppliers reach consumers with more relevant offers, while creating an additional revenue stream for themselves. The Marketing + Media Alliance South Africa estimates that the local retail media market could grow by 12% a year to 2030 – an indication of growing opportunities. But for the model to be sustainable, customers need to trust retailers with using their data responsibly, and suppliers need to see a clear return on their investment.

There are also opportunities beyond traditional fast-moving-consumer-goods categories. Pet care, health, beauty, baby products and fresh food can help retailers diversify their offering and create new revenue streams, with several grocery groups already investing in these areas.

Technology has a role to play too, but only when it solves a real business problem such as better forecasting to reduce waste and stockouts, and improved fulfilment to strengthen shoppers’ online experience without simply adding to the cost base.

The lesson is simple: Growth in a tougher market does not necessarily require doing more. It may mean doing existing things better – or finding new ways to create value from what a retailer already has.

Funding should follow the opportunity

A tougher market should not mean putting every investment on hold. It means being more selective about where capital goes. A retailer may need working capital for seasonal stock, asset finance for distribution equipment or energy solutions, or longer-term funding for a well-tested expansion. The right funding depends on the opportunity, cash flow profile of the business, and how quickly the investment can deliver a return.

That also changes the role of the banking partner. Finance should be part of a broader conversation about the business: its customers, cash flow, growth opportunities, and risks. At Nedbank, that means understanding the plan behind the funding requirement, asking the difficult questions early, and structuring finance around an investment that can withstand pressure.

South African retail is operating in a difficult consumer environment, and there is little value in pretending otherwise. But difficult does not mean without opportunity. The consumer has shown remarkable resilience, and that resilience has bought retailers some valuable time. Now they need to use it wisely. Easy growth may be behind us for now. But smart growth is still very much on the table.

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