Consumers move to multichannel shopping

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There is an ever increasing number of consumers who browse through multiple retail channels to research and learn about products before making a purchase. Picking up on this development, retailers have been prompted to perk up multichannel practices including opening up online stores and enhancing internet retailing capabilities.

“Multichannel retailing refers to the concept of selling goods through multiple channels rather than solely through one channel, such as traditional brick-and-mortar stores. The additional channels that can be used to reach out to consumers include the internet, mobile devices and catalogs, each of which present unique benefits and drawbacks. To succeed in multichannel retailing, merchants must optimally utilize the benefits of a variety of channels.”

It is crucial that retailers combine multichannel efforts with existing ones to maximize the benefits. Although the number of consumers engaging in multichannel retailing is constantly on the rise, many customers still prefer the touch and feel of a new product before purchasing. A survey, conducted by commerce solution provider ATG, showed that about 40% of respondents who read catalogs never made purchases through them.

Selling through online channels can be marginally more profitable than selling through traditional stores but, online retailing also provides other advantages, “retailers can avoid the risk of stocking inventory, since merchandise can be shipped directly from the supplier to the customer.”

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Retail Confidence Rising

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Last week, after an extensive strategic review a few months ago, Woolworths announced that it would be buying out its 76 South African franchisees. Simplifying the complexity of business was the main driving force behind the decision and cutting out franchisees is the easiest way to accomplish that. Franchisees only account for 10% of Woolies’ turnover and recently their performance has been disappointing. "It's important to protect your brand; if the franchisees are not doing well, it's better to be the captain of your own ship," said Du Plessis, chief investment officer at Gryphon Asset management. Thanks to good financial results over the past year, Woolies has cash available to fund the buyout. Woolworths have also opened discussion about the future of their African franchises.

Business confidence rebounded in the third quarter, reaching its highest level in two-and-a-half years. A surge of optimism within the motor industry and the trade sector was the main driver of the jump in the business confidence index produced by Rand Merchant Bank (RMB) and the Bureau for Economic Research. That drove the overall index up from 36 in the second quarter to 47 in the third quarter, its highest since the first quarter of 2008, though still well below the neutral level of 50.

New vehicle dealer confidence rose to its highest level in 4 years when its index points surged up to 79 from 49. The industry as a whole enjoyed massive improvements, and sales grew by almost 37% on the year last month and close to 13% higher than July. Despite these positive results, the impact of the carbon tax is yet to be seen.

Retail confidence also climbed, rising by 14 index points to 52 and wiping out all the losses of the second quarter. Wholesale confidence rose to 50 from 47. That was also in line with more positive data on the retail sector — SA’s fourth-biggest — and a recovery in consumer spending, the main growth engine of the economy.

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Consumer Protection Act

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On the 24th of October the Consumer Protection Act takes effect, and everyone’s waiting in anticipation and wondering who it will affect, and how. Will it breathe some life into consumer’s rights in the local market or will it fall by the wayside onto the ever increasing pile of consumer formalities?

As its name suggests, the act sets out to protect the rights of consumers. And manufacturers, suppliers and retailers should take note that ‘consumer’ is a very broad term in this case and encompasses any user, recipient or beneficiary of goods or services, even if they were not part of an agreement relating to the supply of goods.

Furthermore, the legislation dictates that formal policies and documents be written in plain, simple language to the effect that, “an ordinary consumer with average literacy skills and minimal experience as a consumer…can be expected to understand the content, significance and import of the document”. This could prove to be quite a significant ruling as organizations’ liability risk will increase significantly.

The CPA will have far reaching impact and will influence all aspects of the consumer industry. Look at a case currently taking place in the US where a public interest group is suing soft drink giant Coca Cola for making unjustifiable claims about its vitamin water. This is the kind of power that the CPA hopes to bring to local consumers.

And the cost for breaching the legislation? The penalties are harsh, and an organization which is found by the Tribunal to have contravened the Act, may face:

• An administrative fine up to 10% of annual turnover or
• An administrative fine of up to R1 Million, whichever is the greater.

Organizations have, or should have been, aware of the implementation of the CPA for the last 18 months and if they haven’t begun to assess the implications of this yet, now would be a good time to consider doing just that.

For a concise breakdown of the CPA and its implications take a look at the primary source for this article here.


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All's right with Shoprite

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South African Retailers have managed to maintain positive growth for 6 consecutive months in a tough economic environment. Although the retail sector as a whole experienced growth, not all the fortunes were positive. Massmart were particularly hard hit and experienced a drop in their annual earnings, which caused their share prices to drop by almost 9%. One company however, outshone the rest.

Africa’s biggest grocer, Shoprite Holdings, managed to outperform the competition yet again. Over the year to June 2010 it held an impressive 32.6% share of the market, the highest of all supermarket groups in South Africa, up from 31.4% a year ago. Annual turnover increased 13.6% to R64, 402 billion and their trading profit rose 18.7%. Headline earnings per share rose 15.6% to 451.6 cents, good news for investors who have been snapping up retailers due to increased consumer demand.

The consistent, positive growth of the retail giant has afforded it the opportunity to invest in a aggressive expansion strattegy. Over the next financial year, Shoprite will seek to borrow up to R3.5 billion to facilitate the plans which include opening 85 stores in Africa.

Through the years Shoprite Holdings has proved itself as a formidable retailer in South Africa and have secured their position as Africa’s leading retailer.


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