Five South African retailers have made it on to the Deloitte 2014 Global Powers of Retailing report. Shoprite was ranked at position 94, dropping back one place from the 2013 rankings; Steinhoff International Holdings, better known to South African shoppers as the JD Group (Bradlows, Timber City, Hi Fi Corporation, Morkels, Incredible Connection etc.) jumped up to position 125 for 2014 (2013: 133); Pick ‘n Pay at 137 position in 2014 (2013:135); The Spar Group was ranked umber 172 (2013: 165); and Woolworths, entered at position 234.
“While the global retail landscape is fast changing, the emerging use of technology, market pressures and consumer demands remain a constant. 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,” says Ilse du Toit, manager and retail specialist at professional services firm, Deloitte.
In reaching the Top 250 on the retail hierarchy, South Africa’s top five retailers contributed towards the US $ $4.3 trillion* in total global revenues generated by the 250 largest retailers in the world between June 2012 to June 2013. Woolworths, a new entrant on the list, made a creditable entry at position number 234. The report also emphasises the growing power of e-shopping, by including a list of the world’s top 50 e-retailers, of which 39 are now part of the top 250 retailers globally.
The overall drop in the rankings of three of the listed South African retailers was due to the growth experienced by emerging market retailers, mainly from Asia and Latin America, and a recovery in developed markets that was experienced during the survey period. The leading South African retailer however, reported promising results when their revenues were compared to developed markets that were much harder hit by the recent recession.
This was reflected in the Top 250 aggregate, where the 2012 sales growth was reported at 4.9% with a 3.1% net profit margin for developed markets. In contrast, the seven companies on the list from Africa/Middle East (of which South Africa accounts for five), reported a revenue growth of 13.5% (and a compound annual growth rate, CGAR, of 17%) with net profit margin of 4.4%. These figures were significantly higher than those reported in developed markets with only an emerging market, Latin America, reporting comparable results.
Other major findings highlighted in the 2014 Global Powers of Retailing report were:
- Of the top 10 retailers across the globe, five are based in the USA, one in the UK, three in Germany and one in France;
- Wal-Mart with an annual retail revenue of US $ 4.6 billion is the world’s top retailer;
- Retailers based in emerging markets (excluding South Africa) benefitted from continued strong consumer demand in the previous fiscal year;
- Emerging market retailers accounted for more than half (26) of the world’s 50 fastest-growing retailers;
- Organic growth was one of the large contributors to the growth reported in these markets;
- Retailers that successfully adapted to local trends such as a growing middle-class, increased urbanisation and a very young population showed positive results;
- In these markets basic consumer goods, food, clothes, personal care and electronics were some of the high performing categories.
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. Global Powers of Retail report;
- 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%;
- No South African companies featured in the top 50 e-retail rankings, although several retailers engaged with active e-commerce during 2013 as an alternative channel;
- 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. 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 South Africa 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.
The weakening of the rand during the last year against the major trade and investment currencies has raised concerns that the prices of imported goods and services will rise. In addition, 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. 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,” says Rodger George, Deloitte African Consumer Business Industry Leader.
To download a copy of the 2014 Global Powers of Retailing report, click here.
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