Consumer sentiment in South Africa remains weak amid constrained household finances according to the latest economic outlook report from PwC South Africa.
With private consumption expenditure accounting for 64% of the country’s GDP in 2022, the strength of the consumer wallet is critical to supporting overall economic growth. However, the report indicates that there are still opportunities for jewellery retailers to boost sales through smart promotions and showcasing their sustainability credentials.
On the positive side, total employment has been on the rise. Formal and informal jobs increased by 5% year-on-year in the second quarter of 2023 to 15.8 million:
This resilience has been attributed to businesses adapting to frequent electricity load shedding. Higher employment bodes well for growth in wages, which make up 53% of total household income in South Africa.
However, rising salaries are still being outpaced by inflation.
Average wage growth was 4% in 2022, while the inflation rate reached 6.9% over the same period. This 2.9% decline in real income is undermining consumers’ buying power.
There has been some reprieve more recently, with the inflation rate easing to 4.7% in July 2022, falling within the South African Reserve Bank’s target range. This gives scope for interest rate cuts to be introduced next year.
Consumers Respond to Promotions and Value Sustainability
Despite the squeeze on personal finances, consumers have responded positively to retailer promotions, especially on essential items like cooking oil. Value-conscious shoppers welcome special offers, but still care about overall affordability across a retailer’s product range.
Sustainability has also become a priority for many consumers. In a recent survey, 49% said they were willing to pay over 10% more for goods with a lower carbon footprint. Another 48% were willing to pay a premium for locally produced items.
Opportunities for Jewellery Retailers
In light of these trends, opportunities remain for jewellery retailers amidst the tough climate. Strategic promotions on essential jewellery products like wedding bands and plain gold chains could boost appeal. Retailers should also clearly communicate their sustainability and ethical sourcing policies. With 49% of millennials open to paying more for lower emissions products, ethical credentials will resonate.
Providing a seamless ‘phygital’ shopping experience, blending online and in-store channels, caters to shifting consumer preferences. However, success still depends on forging authentic human connections and relationships with customers. Despite the rise of technology, the essence of retail remains understanding and responding to people’s needs and aspirations.
The current environment may be challenging, but jewellers who focus on value, sustainability and genuine customer service can still shine.