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Sector Spotlight: Retail

Do you want to know more about South Africa’s retail sector? Here’s everything you need to know about entering this industry.

Making your independent store a success means being dedicated and resilient, otherwise you could find yourself struggling to keep up with the big retail giants.

Facts and figures

  • South Africans spent a combined total of R31,900 every second in retail stores last year
  • Stores specialising in food and beverages saw their sales rise by 5% in 2017
  • Hardware stores reported a decline in sales
  • Non-specialised stores are the largest employers, making up 37% of the retail workforce; these stores also pay the lowest salaries

Overview

The retail industry in South Africa has gone through a lot of change in the last 10 years; with foreign retailers such as Wal-Mart and franchise stores sweeping across the country - local retailers and spaza shops have become outdated and many owners are struggling to survive on the high street.

Rising food prices and increasing operational expenses, such as electricity and transport costs, are putting more pressure on retailers who are forced to increase prices, making their store less favourable in comparison to the larger, national stores that offer bulk discount prices.

Consumer shopping habits are also changing, with more South Africans shifting towards healthier food and brand-conscious buying.

To be successful in the retail sector, you need to have your finger on the pulse and keep your stock fresh and always suitable for the right demographic of shoppers in your area.

Staff shortage is also a big issue in retail, with store managers, retail buyers, merchandisers and sales managers noted as some of the scarce skills within the industry. If you’re recruiting new employees, be prepared to offer on-the-job training to get their retail and numeracy skills up to par.

Competition

Different types of stores will have varying levels of competition; for example, the grocery trade is highly competitive with many retailers fighting for prime real estate and stock price wars.

Be aware of which supermarket chains are in the area and consider future development plans too. 

Over the past decade, national grocery retailers have been expanding new stores into rural areas of South Africa, in markets that have previously been undersupplied.

This, along with the impact of regulations, municipal town planning and by-laws, have been negatively affecting smaller stores.

If you’re planning on opening an independent shop, offer a unique, niche service that isn’t being catered for in your local community. Perhaps you could design, sew and sell your own ladies clothing brand, or be a specialist store for selling building materials.

Become an expert in your field and offer your customers advice, loyalty discount cards and a personal customer service experience; this could be the valuable competitive edge you need to beat the national South African retailers, such as Shoprite and Massmart.

Buying an existing business

You can break into the retail industry much faster if you decide to buy an existing business.

To find the right shop to purchase, you must review the business’s current financial statements and latest management accounts, as well as bank statements and VAT returns.

Determine whether the business is dependent on one or two major clients? If so, this could be risky if the current owner decides to set up shop in a different location and take his main clients with him. So, find out what the vendors reason is for selling the business.

The retail industry and investing in a shop in general can be seen as risky but consistently developing, so if you are excited by the prospect of being part of what is to come, then this may be the time for you to find a retail store for sale.



Krystena Griffin

About the author

Krystena Griffin writes for all titles in the Dynamis stable including BusinessesForSale.com, FranchiseSales.com and PropertySales.com as well as other industry publications.

@Be_TheBoss

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