Retail industry takes sharp decline

2008-05-14 00:00

The average consumer’s appetite for goods and services diminished even further in March 2008, with retail trade sales dropping 1,7% year on year, the first annual negative growth rate reported for the year and the indicator’s sharpest decline in more than seven years.

Growth levels in the sector have plummeted and quarter-on-quarter sales growth came in at a mere 0,6%.

Retailers in household furniture, appliances and equipment remain under siege, experiencing negative growth during March. General dealers and retailers involved in the sale of textiles, clothing and footwear recorded some mild growth in March.

"Weakness was especially evident in the sub-category for household furniture, appliances and equipment (-11,9% year on year), indicating that consumers are scaling down their demand for luxury type items, a positive development as far as the visible effect of the interest rate increases are concerned," noted Efficient economist Fanie Joubert.

The Retailers’ Liaison Committee (RLC) also reported slow year-on-year growth in March, with total sales moderating to 2,6% from 4,5% in February, according to Nedbank’s Group Economic Unit.

Cees Bruggemans, FNB chief economist, has noted that growth in household consumption had already dropped below four percent by the final quarter of last year.

He anticipates that growth in household consumption during the next year or two "may barely average two percent".

Although one would hope that the contraction in the sector may provide some protection against further interest rate hikes, experts are of the opinion that a rate hike is imminent.

Given the current turbulence experienced in a tough market, one industry commentator has suggested that retailers focus on implementing plans around consumers, employee-retention and skills development.

Mike Lewin, group retail director at Madison Property Fund Managers, argues that retailers must acknowledge the need for consumer convenience. "Part of that retail management decision is longer shopping hours. There are a number of retailers that are very aggressive in this regard." He also noted that retailers should not underestimate the importance of training and staff retention.

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