Despite retail trade confidence edging up in the third quarter of the year, underlying business conditions remain tough and retailers have begun reconfiguring their business models for survival and adapting their operations to a poor business environment.
This is reflected in the latest retail trade survey released by the Bureau for Economic Research at Stellenbosch University.
Representatives of more than 700 retail stores, wholesalers and motor dealerships were surveyed between August 12 and 31 2020 to ascertain sentiment during the third quarter.
In the second quarter of 2020, South Africa's retail trade confidence plunged to a 29-year low of 11, because retailers of most durable and semi-durable goods were non-operational due to lockdown and could not generate any income for a significant part of the quarter.
In the third quarter retailer confidence rose to 36, the survey report states, which shows that less than four out of 10 respondents were satisfied with business conditions. Although retail sales volumes recovered some lost ground in the third quarter, they still remain well below those of the third quarter last year.
According to the survey report, the improvement in sentiment is due in large part to the easing of lockdown restrictions since the previous BER survey for the second quarter, which reflected record low levels of confidence across all categories.
What remains constant between the second and third quarter business environment is the somewhat restricted trading hours and adherence to Covid-19 hygiene protocols. These continue to increase the operating costs of retailers.
Therefore, the overall third quarter survey of more than 700 retail stores, wholesalers and motor dealerships "simply reflects the changes in the business environment and how consumer spending adjusted following these changes," the report states. It reflects specific retailers' optimism about their ability to trade again, rather than a fundamental shift in the operating or macroeconomic environment.
The report points out that business conditions deteriorated across the entire retail sector in the third quarter given the already bleak domestic situation, further exacerbated by the Covid-19 induced disruptions.
Statistics SA reported that retail sales in April fell to the largest decline on record, down 50.4% compared to April 2019. Prior to lockdown, which started at the end of March, retail sales increased by 2.7% in March as a result of panic buying.
In July retail sales declined by 9% year-on-year, according to Stats SA. At that stage retail sales had decline for four months in a row, despite progressive easing of lockdown restrictions.