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Retail strategies and tactics to navigate economic headwinds

By Steven Heilbron, CEO of Capital Connect

With the International Monetary Fund forecasting that South African GDP will grow only 1% this year against a backdrop of load shedding and logistics disruptions, to grow and thrive retail strategies will need to include focusing on diversification into new sectors as well as expanding market share at the expense of competitors.

That’s according to Steven Heilbron, CEO of Capital Connect, who comments that weak consumer confidence, a flat economy, and uncertainty ahead of the national elections are all headwinds for the retail sector.

This follows several difficult years of trading, with StatsSA data showing that overall retail trade sales decreased by 1.0% in 2023 compared with 2022 — despite stronger than expected sales over the December period. “Even against this backdrop, we have seen some retailers take the gap and grow their businesses,” says Heilbron.

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According to Heilbron, these successful retail businesses are implement the following tactics and retail strategies during difficult times:

Focus on growth markets:

While the StatsSA data shows downward trends in most retail sectors, there are exceptions such as clothing and textiles sectors. Retailers should look at ways to move into these markets, whether that’s by acquiring or partnering with a complementary business, or adding new product lines to their offering.  

Segment the customer base and hit each segment with the right value proposition:

Many retailers are focused on trade by foot traffic rather than thinking about who their best customers are and how to attract them. A winning strategy is to market different propositions to different segments to gain share and cover the market. For example, retailers can target great deals on essential goods at mass market customers, and one-hour delivery or premium products at higher LSMs.  

Improve inventory management:

Optimising inventory levels and reducing excess stock can free up capital and improve cash flow. Retailers can use data analytics and demand forecasting tools to better align inventory levels with customer demand and minimise carrying costs.  

Focus on customer retention:

During economic downturns, retaining existing customers becomes crucial. Retailers can invest in loyalty programs, personalised marketing, and exceptional customer service to keep customers coming back. 

Make strategic bulk buys:

A well-timed bulk buy can enable a retailer to purchase inventory at a lower cost than usual, to sell it for a higher profit margin. In addition, a retailer could buy products at a discounted rate to offer deals that entice more customers through the door. 

Find new points of presence:

Retailers can grow by finding new points of presence, such as containerised coffee shops, pop-up stalls at events, or ecommerce websites.  

Consider high-margin convenience offerings:

Retailers can grow revenues by offering grab-and-go meals or coffee to busy consumers. Using some floor space in this way can be a highly efficient way to attract customers and add a new revenue stream.

 

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Franchise Expo

With the International Monetary Fund forecasting that South African GDP will grow only 1% this year against a backdrop of load shedding and logistics disruptions, to grow and thrive retail strategies will need to include focusing on diversification into new sectors as well as expanding market share at the expense of competitors.

That’s according to Steven Heilbron, CEO of Capital Connect, who comments that weak consumer confidence, a flat economy, and uncertainty ahead of the national elections are all headwinds for the retail sector.

This follows several difficult years of trading, with StatsSA data showing that overall retail trade sales decreased by 1.0% in 2023 compared with 2022 — despite stronger than expected sales over the December period. “Even against this backdrop, we have seen some retailers take the gap and grow their businesses,” says Heilbron.

- Advertisement -
3@1 Franchises

According to Heilbron, these successful retail businesses are implement the following tactics and retail strategies during difficult times:

Focus on growth markets:

While the StatsSA data shows downward trends in most retail sectors, there are exceptions such as clothing and textiles sectors. Retailers should look at ways to move into these markets, whether that’s by acquiring or partnering with a complementary business, or adding new product lines to their offering.  

Segment the customer base and hit each segment with the right value proposition:

Many retailers are focused on trade by foot traffic rather than thinking about who their best customers are and how to attract them. A winning strategy is to market different propositions to different segments to gain share and cover the market. For example, retailers can target great deals on essential goods at mass market customers, and one-hour delivery or premium products at higher LSMs.  

Improve inventory management:

Optimising inventory levels and reducing excess stock can free up capital and improve cash flow. Retailers can use data analytics and demand forecasting tools to better align inventory levels with customer demand and minimise carrying costs.  

Focus on customer retention:

During economic downturns, retaining existing customers becomes crucial. Retailers can invest in loyalty programs, personalised marketing, and exceptional customer service to keep customers coming back. 

Make strategic bulk buys:

A well-timed bulk buy can enable a retailer to purchase inventory at a lower cost than usual, to sell it for a higher profit margin. In addition, a retailer could buy products at a discounted rate to offer deals that entice more customers through the door. 

Find new points of presence:

Retailers can grow by finding new points of presence, such as containerised coffee shops, pop-up stalls at events, or ecommerce websites.  

Consider high-margin convenience offerings:

Retailers can grow revenues by offering grab-and-go meals or coffee to busy consumers. Using some floor space in this way can be a highly efficient way to attract customers and add a new revenue stream.

 

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