The South African retail market appears to be one of the sectors that has emerged relatively unscathed from the economic downturn with recent reports predicting an increase in retail sales for 2012. With interest rates likely to remain low for quite some time, consumers appear to be continuing to spend more than in previous years. According to the South African Property Owners Association (SAPOA), consumer spending is up 30% in the four years to September 2011. Regional and super regional shopping centres seem to be faring best with smaller community and neighbourhood centres following behind.
The South African retail market has also increasingly attracted the attention of leading British, European and US brands looking to expand their market footprint. Marco Cicoria, CEO of Brand Capital, a leading brand management company, believes international fashion brands are definitely seeing potential in the SA market.
“Generally during a recession, brands will look for a new market. South Africa is however one of the most price sensitive markets in the world and brands need to cleverly position themselves within this pricing structure, taking careful heed of the impact of exchange rates and import costs on retail prices. Ideally they want to position themselves in a similar category to where they are globally and can’t take the risk of out-pricing themselves in a new market,” he says.
No stranger to the retail sector having spent the last 15 years in fashion merchandising and buying and just about to launch one of Britain’s top mid-tier designer fashion brands, Ted Baker, in South Africa, Cicoria is intimately aware of the latest local and global retail fashion trends.
“We have seen a revival in brand purchasing with big brands performing well. In South Africa these brands are targeting consumers that are not spoilt for choice. Because there has been a ten year price war in the SA market with retailers driving to offer everyday, affordable brands, there has been little focus on the high-end consumer. The reality is that there are still affluent shoppers in the mid to premium fashion brand tiers. These shoppers generally travel extensively and can relate to international brands and are willing to pay a premium for quality merchandise.”
Cicoria says the secret to successfully taking a brand into any new country is having the correct local knowledge and market intelligence available. He says the South African retail market is unique because of its retail structure. The ‘suburban retail centres model’ – successful in SA – is very different to the ‘high street market model’ evident in most European and British cities. “Only through understanding the unique attributes that our malls offer can brands penetrate this market and this is where a local partner can help with brand positioning, retailer negotiations, pricing, import duties, partnering with financial institutions, marketing and the like,” explains Cicoria.
International impact on local brands
Just how the introduction of new international brands into the SA market will affect local brands is yet to be seen but Cicoria believes there is a market for both. “We don’t believe the introduction of these brands will affect local markets as much as we may think. Ted Baker for example is a quality, luxury brand but sold at an affordable price when compared to other premium brands. It has been highly successful in the UK because of this philosophy. It will be positioned differently to most local brands and even the existing international premium brands already in SA,” he says.
Ted Baker will be making its debut in South Africa at the end of March in four of the Stuttafords stores countrywide. “We advised Ted Baker to enter the market via a store-within-a-store route in Stuttafords as opposed to launching with a standalone store. “We felt it made sense for a relatively unknown international brand to leverage off a chain, such as Stuttafords, that already provides the platform for a number of other top international brands and attracts a discerning clientele. Stuttaford’s stores are strategically located around the country offering an excellent distribution opportunity for Ted Baker.”
So is this the opportune time to be bringing in a new brand? Cicoria believes it is. “The SA retail market and consumers are hungry for exciting international brands. We are in the midst of a consumer revival and now is the time for international brands to start testing the SA waters. It is a lucrative market if approached in the right way,” he concludes.