Hello 

The 22seven Insights spending dashboards offer a detailed view of the aggregated spending patterns of 22seven’s 50,000 users across three retail categories: Grocery, Apparel and General Merchandise (GM).We encourage readers to explore the dashboards for a visual summary of trends affecting the major listed and unlisted retailers in these important sectors.

Shop Talk is a monthly newsletter that provides commentary 

on

 major

 themes 

emerging from the 

dashboard categories. This month, we 

turn our attention to Grocery.

By Simon Anderssen / [email protected]

Over the last three months, 22seven users’ spending on Total Food and Groceries increased at a faster rate than spending in other retail categories such as Clothing and General Merchandise. This likely reflects the growing economic toll being placed on consumers’ discretionary spending, as well as ongoing food inflation (see below).

Total Food represents 22seven users’ spending on everything related to food, namely groceries, restaurants and takeaways, and delivery options. Total Food extends our original analysis first shared in 

this June 2022 report

, when food delivery and on-demand grocery delivery were gaining significant ‘Share of Stomach’.

Within this Total Food wallet, over the last three months, users have been spending more at grocery stores and less on prepared food delivery services such as Uber Eats and Mr D Food. This probably reflects a normalisation of consumer activity away from delivery options that benefited in a Covid lockdown environment. It also likely reflects affordability constraints on the back of food inflation and other economic pressures that increased during the second half of 2022.

Official food inflation reached 12.7% in December 2022, up from 5.9% a year previously. At the same time, all recent trading updates from the grocery retailers have highlighted the disruption (and cost) of load-shedding to their businesses. 

So, how have customers reacted?

The chart below shows the relationship between the change in total spending per user in the R10 – 25k pm income bracket and the annual change in transaction value and frequency of purchases, over the last three months ending in January. For comparison, we show the average reported price movement from the retailers’ recent trading updates (8,7%).

Spending per user is increasing at a slower rate at all grocery retailers, compared to the average price movement, confirming the negative growth in unit volumes implied by most of the recent updates. 

This is happening even although users are shopping more frequently at most retailers, except PnP and Boxer, compared to a year ago. However, our data also indicates that the users who are shopping more frequently are spending less per shop – a sign of more judicious allocation of grocery budgets. 

The following chart shows that the shift back to in-store grocery shopping has benefited all grocery retailers tracked by Insights, with the exception of PnP. We also include smaller retailers like Food Lover's Market and OK, to show that the return to in-store shopping doesn’t only benefit the major retailers. 

Put differently, the level of competition in the grocery sector has increased because consumers have many more options when they shop in-store than they do when shopping online and ordering for delivery. 

In last month’s Shop Talk, we highlighted Spar’s good trading momentum during December but we hesitated to call an inflection in the retailer’s performance because of the potential for seasonal shifts in consumer spending. 

January’s data affirms our caution: As shown in the chart below, Spar gave back most of its improvements in market share for users in the R10-25k and R25-40k pm income brackets. Still, Spar’s net change in market share over the last three months is positive, as shown in the preceding chart.

There are many more insights available from our spending dashboards, Please set up a time to discuss these in more detail to ensure you get the most from this unique data set. 

If you want to know more about data-driven consumer trends in South Africa, sign up for Nugget, our bi-weekly newsletter. You can also follow Insights on LinkedIn and Twitter.

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