The South African consumer index is at its highest level in 25 years and SA's retail sector is enjoying sustained growth on the back of an extended consumer boom, but even firmly established incumbents still need to keep a close eye on their businesses.
This is according to Philip Savides, Business Connexion's Western Cape regional chief executive, who points out that retailers are increasingly broadening their operations into different markets, while international operators are eyeing the local market.
This situation has retailers carefully considering their technology choices and the way in which they procure and deploy these services.
"There is little question that the retail environment in this country is a highly active and immensely valuable one. However, even though there is a boom in consumer spending, competition is rife and 'cannibalisation' of markets widespread, as retailers seek to secure a greater slice of the market. Another interest rate hike will put even more pressure on retailers to retain and grow their customers' spend.
"As such, organisations are now also focusing on non-traditional products and store formats. So, those that once focused on groceries alone are now moving into clothing; those previously specialising in clothing are introducing lifestyle, furniture and sporting goods, and most have already expanded into financial and banking services," says Savides.
He notes that international interest is further demonstrating that investors believe the full value of the retail environment in this country has yet to be realised. "Bain Capital, for example, is interested in entering the market through its R25 billion offer for Edcon. The significance of this is that Bain is offering a 50% premium on the Edcon share price, demonstrating its confidence in unlocking further value."
Within this intensively competitive environment, retailers are highly dependent on technology solutions that enable them to achieve the efficiency and accuracy of supply necessary to create profit. "Margins are low, especially for those retailers competing solely on price. This demands optimisation and efficiency on top of economies of scale.
"Another way retailers can remain proactive and flexible in this challenging environment is to leverage information they already have at their fingertips. By implementing technologies such as customer relationship management, business intelligence and supply chain collaboration, retailers can quickly focus on their core clients, products and suppliers, thereby assuring revenue and profits," concludes Savides.
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