WITH consumers tightening their belts to brace against expected price hikes, experts believe the retail sector is in for a bumpy year.
Industry insiders say the first half of the year will be the most difficult as debt catches up with consumers who overextended their credit over the festive season – accelerating the slowdown in retail sales growth.
Eastern Cape chairman of the South African Council of Shopping Centres Marios van Dongen said the first six months of the year were always tough for the retail sector.
"Over Christmas consumers tend to take their credit to the max," Van Dongen said.
Disposable household income was also dwindling due to economic pressures and tariff hikes, including Eskom's proposed price increases, which would have a direct impact on consumer spending, he said.
Nelson Mandela Bay Business Chamber chief executive Kevin Hustler said he expected this to be a tough year, with consumers belt-tightening as external pressures impacted on their disposable income.
"The availability of household disposable income will continue to be impacted by the price of crude oil, rising costs of electricity and fluctuations in the dollar/rand exchange rate which will impact on the consumer's pockets and theirspend at the end of the day." Hustler also said social stability with no disruptions to production would see a stronger output from manufacturers, although consumer demand would probably remain flat.
"The retail industry will need to be creative in adding value to the consumer through bulk discounts and containment of pricing of known value items (KVI's).
"Shoppers are looking for value addition and will shop with their feet to find the best value for money on a tight budget," Hustler said.
Household and consumer strategist John Loos said evidence of retail sales growth taking a dive was already apparent. Recent retail sales data had shown a broad slowdown in year-on-year growth, with more constrained growth this year anticipated.
With data available for 11 of the 12 months last year, it looked like last year's overall real retail sales growth was around 4.5%, he said. Although down on the 5.9% recorded in 2011, such growth was still very impressive in a recently battling economy.
"In the near term, there are a number of factors that are stacked against retail sales growth ... These include the likelihood of slower real disposable income growth more in line with economic growth," Loos said.
Therefore, real retail growth would be in line with anticipated economic growth at between 2% and 3%.
He said the drivers of strong consumer demand and retail sales growth between 2010 and last year were dissipating. These drivers included real disposable income growth and easy consumer credit access.