October 15, 2003

By Vera von Lieres

Cape Town - The biggest challenge facing the retail sector was deflation, with clothing inflation having largely disappeared over the last eight months, according to JP Morgan retail analyst and vice-president Natasha Ingham.

Speaking at the eighth African Congress of Shopping Centres yesterday, Ingham said the big question was whether expected further interest rates cuts would lead to increased volume among retailers to counter the impact of declining prices.

A deflationary environment is generally more detrimental to food retailers than clothing retailers.

Ingham said South African retailers had worked consistently on focusing their business model over the last five years in an unpredictable environment. This had resulted in clothing and food retailers that were internationally comparable.  

Whitey Basson, the chief executive of Shoprite Holdings, said globalisation would be the catchword in the changing face of food retailing over the next 10 years.

"Running retail businesses [across borders] is becoming easier by the day," Basson said on day two of the conference.

"The threats of globalisation should not be underestimated."

Of the top 100 retailers worldwide, 90 percent now had global operations as opposed to 30 percent in 1997.

Big global companies were looking carefully at where the "food dollar" was being spent and, according to Basson, local and global food retailers alike faced the challenge of expanding or "falling by the wayside".

Shoprite's share price closed unchanged at R7.70.