South Africa’s clothing and footwear industry is expected to demonstrate strong growth in the medium-term (2022-2026), aided by real disposable income growth and a young, urban consumer base, according to Fitch Solutions.
The clothing and footwear segment of the South African economy was heavily impacted by the pandemic as reduced employment and lockdowns resulted in a 20.3 per cent year-on-year contraction in 2020. While total spending on clothing and footwear will not reach pre-pandemic levels in 2022, full recovery is expected by 2023.
In 2022, spending on clothing will reach ZAR121.1 billion (US$8.2 billion) while footwear spending will total ZAR52.4 billion (US$3.6 billion). Over the 2022 to 2026 period, total spending on clothing and footwear will grow to ZAR233.0 billion (US$13.4 billion), which is expected to be largely supported by improving disposable but also wider product availability and means of financing purchases.
“As mentioned above, the clothing and footwear segments’ resilience to inflation is a further upside to our outlook. Consumers are able to plan and budget more effectively for clothing items, whose prices tend to stay more constant.”
Fitch
Consumers Preference for Clothing and Footwear
South African consumers tend to have well developed preferences when it comes to clothing and footwear, with a particularly high demand for international sports brands. Wide-spread availability of brands such aa Nike, Adidas and Puma make a lot of their product’s aspirational purchases for many lower-middle income households.
In order to access these brands, in-store credit facilities have become the main way of financing typically unaffordable products for many consumers. Retailers such as Truworths, Woolworths, TotalSports, Foschini and Edgars all offer in-store credit facilities and payment plans, largely in response to many customers not having formal credit facilities from commercial banks.
“We believe the population group aged between 15 and 40 years, is the key target market for many fast-fashion retailers and stores selling aspirational brands, such as Nike, Adidas and Puma.”
Fitch
Growth of E-Commerce
The growth of e-commerce in South Africa has had a positive impact on the clothing and footwear segment, with both established clothing retailers and new platforms aiming to gain access to one of the biggest consumer markets in Sub-Saharan Africa.
The domestic e-commerce player, Takealot and their clothing subsidiary, Superbalist, are one of the largest players in the market and compete with Zando and StyleMode (a subsidiary of Loot, another online marketplace). Formal retailers such as Wooloworths, H&M and Zara all have online store formats, which allow for click and collect services or delivery options.
“While this sector currently focuses on catering for upper-middle- and upper-income households (households with annual disposable incomes of more than US$ 25,000), we will see continued growth in this segment over the medium-term as real disposable incomes grow in the country.”
Fitch
Over the medium-term we expect to see an increase in non-essentials share of total spending, and by 2026, will account for 45.5 per cent of total household spending.
Fitch believes that a larger consumer market exists within the essential’s category, as a majority of consumers and household fall in the lower-to-middle (disposable household income between US$5,000-US$10,000) income bracket. Retailers should focus on targeting these households over the medium term, Fitch noted.
Within the essential spending category, food and non-alcoholic drinks, clothing and footwear and housing and utilities will post the strongest growth over the medium-term.
Clothing and footwear spending will grow quickest, with a five-year CAGR of 7.7 per cent, followed by food and non-alcoholic drinks, with a CAGR of 7.5 per cent, and housing utilities spending, with 7.2 per cent.
Chinese Imports and Fast Fashion
While South Africa has a strong local textiles industry, a large portion of clothing demand is met by foreign imports. In 2021, clothing imports totalled approximately US$960.9 billion, growing from US$784.9 billion in 2017.
China is South Africa’s leading trade partner when it comes to clothing, accounting for just under 48% of total clothing imports, in 2021, followed by Madagascar and Mauritius who accounted for 9.3% and 7.5% respectively.
Neighbouring eSwatini, Lesotho and nearby Madagascar have all benefitted from the growth of clothing demand in South Africa, with some South African manufacturers moving their operations to nearby countries so as to reduce labour and transportation costs.
Chinese clothing retailer, Shein, is also present in South Africa, offering some of the lowest price points for trending fashion items, while retailers such as Mr Price, Cotton and Factorie have targeted South Africa’s large Gen Z and Millennial population groups with their in-season, fast fashion offering.
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