Welcome to our newsletter that provides commentary on themes emerging from our live Market Reports. This month we're tracking user growth at Temu, the new Chinese megastore, and we’re looking at general spending trends across the major retail categories.

‘Beware the Ides of March,’ said the fortune teller to Julius Caesar (via Shakespeare). Never mind the Ides, if you’re a retailer in South Africa, you might as well forget about the whole month. 

Consumer spending weakened again during March, slowing across all major categories including Grocery, Eating Out and Pharmacy, all three of which had been relatively robust coming into 2024. Discretionary spending categories like Apparel and Home remain under stress. 

Decline in food spend (Grocery and Eating Out) might be related to the Easter holiday and its profusion of public holidays falling in March this year, as opposed to April in 2023. We highlighted Pharmacy’s strong performance in last month’s Shop Talk. The spending decline in March could simply be a normalisation of this upward trend. 

SPENDING GROWTH BY CATEGORY

What a customer spends each month at a particular retailer is a function of how often they shop there and how much they spend each visit. Our data provides a clear picture of this because we don’t just analyse till sales but rather a customer’s total spending ‘journey’ through the month. 

Since nearly everyone shops for groceries, we can use this method to better understand what’s driving the slowdown in growth.

The chart below unpacks shopper activity by income bracket across the retail landscape. It shows that customers are shopping less often in nearly all income brackets and spending less per visit.

CHANGE IN GROCERY SPENDING OVER 12 MONTHS, BY INCOME BRACKET

Have you also been bombarded by Temu ads? Holographic 3D shirts, pyjama jumpsuits, novelty fish slippers, a fur-drying suit for your dog… The social media onslaught by the Chinese online megastore has been inescapable in recent months. It’s obviously working because – from a standing start at the beginning of 2024 – more users bought from Temu than from Shein in March.

We’ve done two detailed reports about Shein’s explosive rise in South Africa and it’s no secret that the Chinese fashion retailer is now a dominant market player. (Read Shein of the times and The road to Shein.) What does the rise of Temu mean for other general retailers like Takealot and the soon-to-launch Amazon South Africa?

We’re busy working on a detailed analysis of Temu’s growth, asking questions like which demographic is responsible for the growth in spending? And which services have those same shoppers stopped using?

As a subscriber, you'll be among the first to learn who is shopping at Temu, how much they’re spending and how this new player is changing the market landscape.

GROWTH IN CUSTOMER NUMBERS: TEMU VS SHEIN

Our first reading of 1Q24 spending provides context for the relative performance of the major retailers over the past three months. In the chart below, we contrast normalised spending growth to the share price movement for each parent company. Normalised spending measures growth over the past five months, relative to the average performance of the category. Our aim is to represent the most recent unreported information while taking into account the significant month-on-month seasonal fluctuations between November and January.

This is only one view of the data. All such analyses are affected by starting point bias. Clients are welcome to request the spreadsheet to conduct their own analysis.

REVEAL SPENDING GROWTH VS SHARE PRICE MOVEMENT

Our Market Reports offer investors and retailers a detailed, real-time view of the aggregated spending decisions of actual consumers. Reveal tracks spending across seven major categories such as Grocery, Apparel and Home. Every major category is further segmented into sub-categories, and a specific dashboard is available for each. 

The Market Reports provide an overview that includes changes in market share for each retailer, as well as an estimate of growth in user spending. Users are segmented into six income brackets that allow for detailed tracking. In addition, the Market Reports include five years of historic information and other metrics, such as average transaction value and median monthly spend per user. 

Go to the Market Reports

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