Top Risks for Retail Companies in South Africa 2017 | KPMG | ZA

Top Risks for Retail Companies in South Africa 2017

Top Risks for Retail Companies in South Africa 2017

The retail industry in South Africa has a number of risks that should be top of mind for any retailer

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Retail

No matter how beautiful a retailer’s strategy is, one should always look at the results it is bringing. That has seldom been more relevant than in South African consumer marketplace, where simply knowing what your customers really want has become exponentially more complex than it was before the advent of smartphones, the internet and social media. According to a report produced by KPMG, the retail industry in South Africa has a number of risks that should be top of mind for any retailer.

Competition

South African companies face intense competition on a national and international level where retailers often offer the same or similar merchandise and generally competed on the basis of price, quality, or speed to market. It is common to find that some retailers’ competitors may have more resources or evolved business models that provide a better shopping experience that could affect smaller retailers. Also, to add to competition, the cost and barriers to entry into the market is at an all-time low, with a large number of niche players arriving and driving change through fresh ideas and ways of servicing customers.

Customer Trends and Preferences

Customers are the new point-of-sale. For today's connected South African consumer, the shopping 'experience' can be an endless possibility for retailers to try and master and the shopping experiences at those retailers that are meaningful, memorable, shareable and personalized, will maintain traffic. Incorporating technology into a brand persona through influencer marketing is a powerful tool in driving customer habits. We notice more male and female bloggers popping up in South Africa, acquiring attention in the media and specialising in providing reviews on products in their area of expertise. These reviews have a big effect on the general audience who often purchase products solely based on blogger recommendations. Offline, brand building on the retail front has become a team sport for many firms that are generating significant results via partnerships that deliver competitive advantages.

Brand and Reputation

Retailers run the risk that one innocuous post, video or comment from any angle (board, customer, associate or management) could trigger a significant brand protection situation which impacts sales or customer perspective. This is something South African retailers worry about often as damages to one’s brand and reputation can occur at any given moment and is difficult to reverse quickly. Brand and reputation damage is closely linked to social media because of the ease of public opinion as no cost is then immediately felt by any retailer, either in a positive or negative way. This can be summed up as follows: it takes years to build reputation and seconds to destroy. A response for local retailers to keep in mind is that since these incidents usually take place unexpectedly, they need to proactively have measures in place so they could react to situations as they happen.

© 2017 KPMG Services (Pty) Limited, a South Africa private company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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