South African consumers shift to value as economic pressures persist

NIQ South Africa has released its latest State of the Retail Nation analysis for the last quarter and full year calendar year of 2024, showing moderate increases in retail sales despite a strong festive season finish. South African consumers spent nearly R637 billion on fast-moving consumer goods (FMCG) through traditional and modern trade channels during the year. This represents year-over-year growth of just 3.4%, with the increases mostly driven by price increases rather than increased consumption.

The Technology & Durables (T&D) market, meanwhile, experienced flat growth, with sales value increasing just 1.8% to R90 billion. Overall performance was dragged down by a 2% decline in sales value in telecoms, the biggest T&D category representing more than half of the T&D market’s value. Washing machines were one of the star performers of the year – growing sales every month and overall achieving 16% growth in sales value and units.

Says Zak Haeri, Managing Director for NIQ in South Africa: “Despite much-improved consumer sentiment off the back of lower levels of load shedding, social grant increases and slower price increases, retail recorded only moderate gains in sales during 2024. High unemployment and rising living costs continue to challenge many households, with consumers seeking value when they shop. Fiercer price competition and aggressive discounting continue to suppress growth in the FMCG and T&D segments alike.”

Festive season cheer for the FMCG sector

For the full year of 2024, South Africans spent R359 billion on food and liquor as well as R278 billion on other goods, including non-alcoholic beverages, personal and healthcare products, snacks, home and pet supplies, baby food and care, and tobacco.

Private label brands dominated, achieving 7.1% sales value growth and reaching R98.7 billion in total sales value for 2024 – outpacing the growth of the overall market. Growth in private label sales is being driven by its broad cross-category reach, easier access to shelf space, and consumers’ increasing focus on cost savings.

The fourth quarter saw 4.8% year-over-year growth, translating to R177 billion in value and a sales value change of R8 billion. Liquor, personal care and ambient foods experienced the most notable growth. December was a strong month, with R78 billion in retail spending – up 9% in sales value from the previous year. Food and liquor accounted for 58% (R45 billion) of overall sales during the festive period, as consumers continued a trend towards at-home activities.

“Consumers are still focusing on essential spending and taking advantage of loyalty programmes, private label brands and promotions to stretch their rand further,” says Haeri. “Macroeconomic conditions are steering households toward perceived value, with the term “discount” now encompassing more than mere price reductions. Depending on their cash flow, consumers are buying large packages to take advantage of lower bulk costs or buying small packages to reduce immediate spending. On the flip side, we also see healthy growth in super-premium segments, indicating that some consumers are not feeling the pinch.”

T&D sector takes a hit from smartphone saturation

A surge in Black Friday spending wasn’t enough to turn around a disappointing year for the T&D sector. Although the IT segment (up 7%), major domestic appliances (up 10%) and small domestic appliance (up 9%) segments showed strong growth, they could not compensate for the negative growth in the telecoms segment. This category, which represents 53% of the total sales value in the South African T&D market, showed negative growth (down 2%) due to market saturation and slower smartphone upgrade cycles. Consumer electronics (including TVs) was flat.

The telecom market experienced negative growth in value and flat growth in units as 3G phones continued to be phased out. The market is still stratified, with 5G phones 55 times more expensive than 2G phones. 4G phones are now the standard, making up over 60% of unit sales. Prices decreased by 9% compared to the previous year during the fourth quarter, with consumers benefitting from wider discounting and aggressive competition from emerging Chinese brands.

On the upside, the T&D market enjoyed its biggest Black Friday to date. Consumers took advantage of discounts, with prices down by around 5%, unit sales up 12%, and sales value up 7% compared to Black Friday 2023. Discounts were lower but more widespread than in previous years. In 2022 and 2023, 28% and 31% of unit sales, respectively, were discounted by more than 15%, but in 2024 this dropped to 18%. TVs, coffee machines, fridges, and cooking appliances performed best against sales for the first few months of the year.

Thomas Woods, Market Intelligence Lead for NIQ in South Africa, says: “The introduction of the two-pot retirement saving system may have contributed to higher sales during the fourth quarter, with SARS reporting R35 billion in withdrawals. Online T&D sales grew 9% for the year, outpacing the broader market, as consumers increasingly sought better deals online.”

Looking ahead

Haeri concludes: “While consumer sentiment has improved over the past year, potential headwinds remain – such as a possible VAT increase and how global trade volatility affects South Africa. However, we anticipate that mainstream consumers will remain adaptable as macroeconomic conditions change. Retailers that strike the right balance – offering value through rewards and promotions to the mainstream market while taking advantage of the opportunities in the premium segment – will be best positioned to thrive in the year ahead.”