4 July 2022: Retail sales trends, which serve as useful indicators of customer behaviour, show that seasonally adjusted retail sales fell from R80 million in April 2021, to R73 million in July 2021. These figures, presented by Stats SA, showed an almost 9% decrease, with sales rising steadily during the second half of the year. This year, while retail sales rose 3,4% year-on-year in April 2022, rising inflation and petrol hikes are predicted to place household incomes under increasing pressure. Coupled with the slump in sales brought on by the colder weather, SMEs will be feeling the pinch this winter, which are notoriously challenging months for retailers. However, careful preparation and strategic sales tactics can help SMEs beat the chill.
This is the opinion of Rene Botha, Area Manager at Business Partners Ltd, who asserts that “the dip in retail sales we saw in 2021 was exacerbated by the spate of unrest that broke out in several provinces. This year, we are contending with the knock-on effects of the Soweto shutdown which has affected a number of SMEs. But what we also know is that our country’s entrepreneurs are incredibly resilient. We therefore encourage them to think creatively to find ways to overcome some of the difficulties that the off-season presents.”
According to the most recent quarterly SME Index, conducted by Business Partners Ltd, the main challenge that small businesses will face in the next six months relates to cashflow. As Botha explains, this has been the status quo for a number of years, except in 2020 when issues around restrictive Covid-19 regulation became most prominent. Given this finding, effective cashflow management should be the priority for SMEs this winter.
Botha offers the following advice in this regard: “The basic principle, when it comes to managing your cash flow efficiently, is to increase the flow of revenue and keep expenses to a minimum. Touching on the second part of the equation, SMEs can take a closer look at reducing some of the hidden costs that come with the colder season. Instead of spending money on office heating, allow staff to work from home over this period, and switch to energy-efficient appliances. On the revenue side of cash flow, you can offer incentives for early payments on clients who order in bulk,” advises Botha.
Another tip that Botha offers small businesses is to examine where cash can be removed from the equation completely by participating in the barter economy. The practice of making bartering deals with other businesses has been leveraged by companies in the South African media industry as well as travel and hospitality for a number of years.
Globally, the barter economy is providing several cashless solutions to trade. Although this trend is yet to take hold in South Africa, in Botha’s opinion, there are valuable lessons that local SMEs can take from businesses who barter.
Expanding on how this could work, Botha suggests that: “SMEs can barter with freelance marketers or smaller agencies to exchange marketing consultancy services for goods and services like coffee, beauty therapy, discount vouchers or interior design services. If you’re a small business that can offer a good or service that can help a corporate with boosting their staff wellbeing, that’s an opportunity for a trade exchange. During cash-strapped months, sometimes the best idea is to think beyond cash,” she concluded.
Thinking strategically about the way you run your business during the off-season could also include reviewing your product or service delivery model. The e-commerce boom, catalyzed by the pandemic, led experts to predict that South Africa’s annual e-commerce growth could stabilise at around 8% over the next three years. With South Africans spending roughly R76 billion online in 2021, SMEs can leverage this trend in the months where brick-and-mortar sales drop.
Expanding on this idea, Botha urges SMEs to “think digital” by going online during winter, but also to think about online shopping beyond the bounds of traditional e-commerce.
As she concludes: “a recent report showed that WhatsApp is South Africa’s most active social media platform, with 90% of the country’s 31 million local internet users making daily use of the platform. Small businesses can develop communities on WhatsApp during winter – a season where less users are outdoors, and more users are using their mobile phones. Think like your customer – talk to them where they are during the off-season and leverage digital tools like Whatsapp to provide a level of personal customer service that will set you apart during this highly competitive period of the year.”
ENDS
About the Author: René Botha
