Although several local retailers engaged with active e-commerce during 2013 as an alternative channel, no South African companies featured in the top 50 e-retail rankings of the Deloitte 2014 Global Powers of Retailing report.
The report identifies the 250 largest retailers around the world based on publicly available data for fiscal 2012 (encompassing companies' fiscal years ended through June 2013) and analyses their performance based on geographic region, product sector, e-commerce activity and other factors.
However, Deloitte is of the view that times may be tough and household budgets stretched, but that does not mean South Africans are staying away from retail outlets and malls. In fact, the consultancy firm says, we, as a nation, enjoy our retail therapy so much that five of our top retailers are featured on the list of the world's 250 largest retailers.
SA's top retailers
In reaching the top 250 on the retail hierarchy, SA's top five retailers contributed towards the $4.3 trillion in total global revenues generated by the 250 largest retailers in the world between June 2012 and June 2013.
"While the global retail landscape is fast changing, the emerging use of technology, market pressures and consumer demands remain a constant," says Ilse du Toit, manager and retail specialist at Deloitte.
"Retailers will be required to review their strategies, optimise their operations and leverage strengths, all while staying current with market trends in order to weather the storms ahead."
From a local perspective, South African shoppers saw the following retailers listed in the Top 250: Shoprite was ranked in 94th position, dropping back one position from the 2013 rankings; Steinhoff International Holdings, better known to South African shoppers as the JD Group (Bradlows, Timber City, HiFi Corporation, Morkels, Incredible Connection etc) jumped up to position 125 for 2014 (2013: 133rd); Pick 'n Pay at 137th position in 2014 (2013:135th); the Spar Group, number 172 (2013: 165); and Woolworths, entering at position 234.
Looking to e-retail activities, the 2014 Global Powers of Retailing found that the rise in the popularity of e-retail is reflected by 39 electronic outlets being listed in the top 250.
The report also found that e-commerce sales, as percentage of revenue, reached 7.7%, with leading retail categories being diversified items, leisure goods and fashion. The year-on-year e-commerce growth for those stores ranking in the top 250 averaged 24.8%.
Strategy review
According to Deloitte, pure-play retailers entering the market to offer specific products, combined with fast moving consumer goods manufacturers selling via online channels direct to the consumer, could result in more large retail groups reviewing their strategies and operating models to ensure future growth.
The challenge for these retailers, as for the global ones, will be the race to the door of the consumer, the firm says, adding that with rising fuel prices and consumer pressures, time from order to delivery will soon become the differentiating factor.
Looking at the current fiscal period, which began in July 2013, the report states that consumers and retailers in SA will face increased market pressures. Key indicators such as GDP, CPI and PPI are not favourable and the consumer confidence index is at a five-year low.
The lower than expected growth reported by various large retailers has also resulted in a steady decline in share prices compared to a growing All-Share index on the JSE reported for the same period.
These pressures increased in the last quarter of 2013, Deloitte notes, adding that although November and December's trade results reported a higher than expected growth in excess of 4%, this trend is unlikely to continue.
Weakening rand
The report also states that the weakening of the rand during the past year against the major trade and investment currencies has raised concerns that the prices of imported goods and services will rise.
In addition, says Deloitte, the weak rand will lead to an alarming rise in fuel costs. The levying of toll fees will further impact the continued rise of input prices to levels which retailers cannot absorb.
These increases will be reflected in rising sales prices putting further pressure on already constrained consumers.
"Consumer's finances are under severe threat. Interest rates have recently increased and fuel prices are at an all-time high," says Rodger George, Deloitte African consumer business industry leader.
"Consumer sentiments and morale are low and recently implemented toll fees across Gauteng are not helping matters much. Retailers looking to maintain market share need to have a clear value strategy beyond the current market practice of discounting merchandise, as trading is likely to remain flat for some time to come."
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