Zimbabwe’s retail sector facing decline in revenue inflows

by roberta katunga | Sunday, Jul 20, 2014 | 6000 views

TM
ESTABLISHED retailers are facing a decline in revenue as a result of limited and constrained consumer disposable incomes, stockbrokers have said. According to a research done by a local stockbroking firm, consumers are now turning to low-priced goods and low cost outlets have taken advantage of this change in consumption patterns and are thriving at the expense of established retailers like OK and TM supermarkets.

Recent results for the financial year 2014 for most established retailers showed that the sector was experiencing declining profitability and subdued growth in revenue.

For OK, revenue for the period was a 0,9 percent increase to $483,7 million compared to a 16 percent growth between end of 2012 and 2013.
Lynton-Edwards Stockbrokers Research analyst Mr Kudzanai Sharara said there was a shift in grocery consumers as they change dynamics of their shopping habits.

“The falling level of discretionary income has forced more consumers to downgrade their purchases to less expensive alternatives. Mini wholesalers have taken advantage of this change in structure,” said Mr Sharara.

Mr Sharara said mini wholesalers could afford to sell their goods at lower prices as compared to established retail outlets because they did not have a lot of overhead expenses and could only put a mark-up on their basic items.

He said these outlets were not as sophisticated as major supermarkets.
“Established retailers pay a lot in terms of rentals, utilities and also need adequate staff. One of the supermarkets had to employ an extra 100 employees so as to provide adequate services in their shops.

Mini wholesalers on the other hand have a low cost base,” he said.
According to Lynton-Edwards, consumers were becoming increasingly price sensitive and this has led to the growth of the informal retail sector in the country, which is being recognised by manufacturers and wholesalers as an important delivery channel of goods to consumers.

“Informal market retailers cater to the needs of the residents via independent grocery stores and several informal Zimbabwean retail concepts including hawkers, tuck shops and kiosks,” read part of the research by the stockbrokers.

According to the stockbrokers, due to the change in structures and trends, established retailers had modelled their brands along these lines.
The Meikles group introduced the Meikles Mega Market, which sells products at both retail and wholesale prices and sells mostly lower margin products that target the lower end of the consumer market.

OK has a similar business model in the form of OK Mart that is modelled as a high volume, low expense business that enables the provision of low prices on an extensive range of products to its customer base.

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