Consumer spending may be starting to turn the corner, with 42% of South African consumers believing they are in a better financial position compared with the same period last year. But most people are still feeling the effects of high interest rates and a sluggish economy.
According to the “State of the Retail Nation” Q3 report produced by NIQ South Africa, a leading consumer intelligence firm, South Africans spent R354bn on food and liquor in the 12 months to September, and R274bn on other goods including non-alcoholic beverages, personal and health-care products, snacks, home and pet supplies, baby food and tobacco. The most recent quarter has seen a year-on-year growth of 2,6% in the sale of fast-moving consumer goods.
According to the World Data Lab, global consumers will spend $3.2-trillion (aboutR56-trillion) more in 2025, representing nearly 6% growth compared to 2024.
But while 42% of South African consumers reported they were better off than this time last year, 33% indicated they were worse off and only 17% said they were thriving financially, up 11% from 2023. NIQ said this was an improvement from mid-2023 when only 36% of consumers said they were better off than the year before, and 42% said they were worse off.
The report analyses data from 10,000 branded retail outlets and 143,000 independent stores across all nine provinces.
It found that South African consumers’ top concern remained rising food prices (39%), followed by increasing utilities costs (24%) and the threat of an economic downturn (20%). Some 83% of consumers were seeking income streams beyond their primary jobs to pay their way, while 27% agreed they were likely to increase personal debt to sustain their lifestyle. A quarter of consumers said they had been affected by job losses or loss of income.
To cope with worsening financial circumstances, 42% of consumers said they had switched to lower-priced products; 43% were buying whichever product was on promotion; 43% bulk-buy when their brands are on sale; 40% shop more often at discount/lower price stores and 55% use loyalty programmes to help manage their spending.
Consumers are seeking value with every purchase in multiple ways. They are spreading their spending in purposeful ways, and their habits and behaviours are changing fast in response to economic trends and new technologies
— Lauren Fernandes, vice-president of global thought leadership, at NIQ
At least 69% of those surveyed said they were likely to change to or try a new brand because of lower pricing; 74% were willing to buy a brand that has innovated to make it as affordable as possible; and 78% said they would buy a product that is energy-efficient or low-cost to run.
Almost half of the surveyed consumers (49%) said they intend to continue cutting back on non-essentials such as out-of-home dining; 46% are cutting down on entertainment; 48% are ordering fewer takeaways and food deliveries; and 44% are choosing to socialise with friends and family rather than go out to places of entertainment. Some 42% of those surveyed are planning to decrease spending on holidays, beauty and grooming; and 41% will spend less on home improvements and décor.
“Consumers are seeking value with every purchase in multiple ways. They are spreading their spending in purposeful ways, and their habits and behaviours are changing fast in response to economic trends and new technologies,” said Lauren Fernandes, vice-president of global thought leadership at NIQ.
NIQ South Africa MD Zak Haeri said consumers were prioritising in-home activities, pre-planned purchases and waste avoidance.
But he said retailers have seen a welcome improvement in consumer confidence ahead of the two most important trading months of the year, which includes Black Friday at the end of this month.
“This clears the way for retailers with attractive promotions to benefit from stronger consumer spending over the Black Friday week, especially tech and durables dealers,” said Haeri, who still warned that the market remained challenging as consumers focus on value for money.
But NIQ noted that consumers are willing to dole out cash for certain premium items such as tech and durables, with unit sales of premium-priced smart/mobile phones, particularly 5G models, up.
NIQ South Africa market intelligence lead Thomas Woods said they had noticed a major jump in major domestic appliance sales in September, with fridge and washing machine sales going up by 12% and 21% respectively. He said this could be attributed to many factors, including two-pot pension withdrawals.
“Two-pot withdrawals are one of the possible reasons for increased tech and durables sales as we enter the last stretch of the year,” Woods said.
He said they expect new brand entrances, especially Chinese disrupters, to use Black Friday as an opportunity to break into new markets, adding that while there are major promotional pushes, they anticipate that overall margins for retailers and manufacturers will be higher than in previous years.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.