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Recession and its impact on South African supermarkets

South Africa has to deal with a shocking discovery that the country has descended into a recession and its GDP has fallen 0.7% in the 2017 end. Various sectors of the economy has seen a decline including construction, transport and manufacturing but there are few sector which haven’t been impacted. As a result, we will see a steep fall in property prices in various cities of South Africa except Cape town which isn’t facing decline in property rates. Although, the prices have seen a steep fall, property experts are hopeful about the future prospects of South African property market.  

Impact on Supermarket sector
If we talk about the supermarket sector, some players have experienced growth in this period of economic downfall. A famous South African chain store has declared growth in earnings in face of high completion in the industry, while companies like Shoprite have sustained their earnings. Pick n Pay announced a 17% rise in its profits, i.e. R2.58 for the year. The company announced an increase of 7% in sales and earnings of R77.5bn, hinting at consistent performance.

A major factor in the unforeseen performance of supermarkets has been a unprecedented economic recession. South African economy is going through a sharp decline, inflation has risen upto 6% and employment is also high at 27%. It is to be noted that a considerable mass is employed in the informal sector. As a result, people prefer to buy from those local markets where they can get products at affordable prices. The supermarkets have responded by lowering the prices to retain the shifting base of customers. They are also developing express stores.

Pic n pay is somewhere short when it comes to customer satisfaction. CSI (customer satisfaction index) for supermarket declared Woolworths(a grocery chain) in the limelight. After interviewing thousands of customers, consulta (a market research firm) found out that customers prefer the stores which are offering products at low prices and ‘the loyalty factor’ has taken a backseat in the midst of economic downfall. Consumers also prefer in store experience over other factors. The stores which are providing good in-store experience are experiencing good customer turnouts.

On the other hand, spar which another major supermarket chain is offering daily incentives and discounts to customers which keep them motivated for more visits.

Key findings:

  • Customer expectations has increase drastically in the last four years.
  • The customer will pay only when they feel that they have got the value of products for the price paid.
  • More and more customers are looking for excellent in-store shopping experience.
  • Customers want to deal with supermarket staff that are proficient in complaint handling.
  • Customer loyality is not a major factor in the face of economic recession; customers will buy from the supermarkets which are selling at discounted rates.

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