The South African retail market has been an intriguing one to follow, particularly over the past decade.

The boom in shopping centre developments alone, resulting in South Africa now having the sixth-highest number of malls in the world, highlights the wealth that has been invested in the country. Drivers behind the retail market’s consistent growth to an estimated R868 billion in 2015 are not straightforward, however, and comprise macroeconomic factors and retail-specific trends that are constantly in flux.

Since the end of Apartheid in 1994 and the subsequent formation of democracy, growth has been closely linked with the rise of the middle class. Although only a relatively small proportion of the population, the middle class’s spending power is disproportionately high, accounting for approximately two thirds of all consumer spend. In the apparel market, spending has also been further bolstered by a growing association between fashion and social status.

International heavy hitters such as Zara, H&M and Cotton On have entered the market in the last five years and successfully gained market share at the expense of local players. Domestic retailers, particularly those with private label offerings, have consequently struggled against the more competitive product ranges offered by these international entrants.

The growth in the retail market has occurred despite weakening economic conditions. Sluggish economic growth, substantial depreciation of the rand, rising inflation and interest rates, and the decreasing availability of credit have all contributed to a dampening of consumer confidence and spending. Local challenges, such as political vicissitudes, add to the uncertainty. There are also signs that growth in shopping mall development has reached its peak, as market pressures have increased vacancy rates in existing developments.

Looking ahead, the tough economic backdrop will continue to be challenging for consumers and retailers. Nevertheless, the ongoing shifts in consumerism, urbanisation and improvements in infrastructure mean that year-on-year growth is possible for those retailers and brands with the operational and commercial competencies to capitalise on these trends.

Kat Yeh