In the last five years, the South African retail industry has experienced a period of transformation. With a rise in online purchasing, the influx of multinational brands, and an increase in consumer trends, the local retail sector has had to work harder than ever to bring feet through the door. This transformation can also be attributed to the current economic climate; it would be naïve to dismiss the impact that the volatile Rand and devastating drought has had on the retail sector. With the VAT increase, weakening currency and the sluggish growth rate, retail companies are facing a rapidly increasing vertical.
Considering these challenges, retail companies have no choice but to mitigate their risks as quickly and as efficiently as possible. Let’s take a look at the three biggest risks retail companies face in 2018:
As consumer needs evolve, their buying patterns begin to change according to products and services that offer a memorable experience. This becomes a challenge for large retail companies that have, in the past, focused on the success of a product or it’s competitive price to bring customers back through the door. Today, retail companies are up against a new set of challenges. A different, unprecedented market that is driven by the buying power of Millennials and Generation Z have changed the way in which companies do business. This consumer demographic is looking for fresh, personal, and inspired experiences which is often only offered by niche companies that quickly become a concern for older, larger companies.
2. Consumer Trends
Online shopping, influencer marketing, and brand partnerships are just a few of the ways the face of retail has evolved. Serving a more connected consumer, retail companies often battle to keep up with the pace at which consumer trends change. When it comes to consumer trends, retailers that are slow to the party are at risk – consumers no longer gravitate to a retail company because they offer unique products. Instead, consumers are looking for more which means that retail companies are required to go above and beyond their current capabilities and offerings. Often, smaller businesses don’t have the resources or capital to extend their services, which can result in a drop in sales and, in some cases, liquidation. Stuttafords, the South African department store hailed as the ‘Harrods of South Africa’ closed its doors after 159 years of operation after it became victim to the massive paradigm shift in consumer trends, and simply could not keep up.
A controversial post on social media can result in thousands of consumers boycotting a product or service or, in the most severe cases, an entire retail chain. Not only does this impact sales, but it takes a significant toll on the reputation of the brand. There is always a risk for retailers who make use of broad-based advertising and social media and, due to freedom of speech, consumers are not afraid to voice their opinion if something is offensive or not inclusive. It is important to remember that it takes years for a brand to build a good reputation, which can be torn down in a matter of minutes if its advertising is not properly thought through.
With these risks in mind, how do retail companies mitigate their risks? One way in which to effectively do so is through ERP software that is designed specifically for the retail space. Not only does this software allow companies to remain competitive, but it also assists in determining the next phase of consumer trends through improved processes and procedures. From sales to customer service, retail-specific ERP software is one of the key solutions when it comes to risk mitigation in the South African retail space.
As the local retail space becomes increasingly competitive, companies have no choice but to adapt. Those that remain loyal to their outdated sales practices and strategies will put their longevity on the line. When it comes to permanence, every retail company’s secret weapon is a reliable ERP software that can keep them at the top of their game.
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