South Africa's retail sector has spent more than a decade navigating relentless macroeconomic headwinds: low growth, high unemployment, elevated interest rates and inflation, and a stubborn electricity crisis.
These pressures have strained household budgets and driven cautious spending. Yet, the latest data suggests a welcome shift – and importantly just ahead of the holiday season.
Could 2025's peak trading period finally give retailers something to celebrate?
South Africa's inflation rate is expected to average 3.2% in 2025 – the lowest since 2006 and a notable improvement from 4.4% in 2024. That easing has boosted purchasing power and created room for rate cuts, with the prime rate now 10.25% – a full percentage point lower year-on-year. The result: lower borrowing costs and rising consumer confidence heading into the holidays.
And the rand, nearly 9% stronger since the start of the year, is helping contain fuel and imported product prices – offering retailers a chance to sharpen promotions and pricing.
This new-found positivity paid off over the Black Friday weekend, according to payment platform Peach Payments. The platform recorded 80% more transactions than Black Friday 2024, and spending is expected to reach between R145 and R153bn – a 5–10% increase on last year’s spend.
Still, optimism is tempered by slower income growth and high debt levels. Consumer sentiment remains fragile:
- 73% of South Africans expect to spend the same or less over the holiday period (NielsenIQ).
- The FNB/BER Consumer Confidence Index slipped to -13 in Q3 2025.
- Household debt to income has risen to around 70%, the highest since 2017 (DebtBusters).
Karen Keylock, national retail manager for Retail Services at Nedbank Commercial Banking, says that by keeping a close eye on global and local research and crunching its own numbers, the bank has identified several opportunities and trends that retailers should capitalise on as they navigate this peak shopping season and beyond to 2026.
Trends to take note of right now
- Consumers are buying with intention. Nielsen IQ reports that 69% of shoppers choose items they will genuinely use, signalling that South Africans are still celebrating but becoming more selective in their holiday spending.
- South African shoppers don't follow a single path when making buying decisions. They research online, compare prices on mobile, and purchase in-store. The 2024 South African Customer Experience Report notes that 57% of shoppers now begin online discovery before buying in-store.
- Speed has become a differentiator. Almost three-quarters of South African shoppers say fast and reliable delivery helps reduce holiday season stress, according to research commissioned by Amazon. As a result, optimising inventory processes rose 9 percentage points year on year as the leading route to boosting profitable online orders.
- Flexible payment tools have become a conversion weapon for retailers. For example, PayJustNow processed R65.3m over the 2024 Black Friday weekend – a 103% year-on-year increase. This is expected to continue, particularly as it appeals to younger shoppers and those without traditional credit, both online and in-store.
Looking to 2026: Challenges and growth hotspots
Keylock says that while momentum is building, underlying pressures remain: muted GDP growth, persistent price sensitivity, and continued downtrading to stretch household budgets.
International online disruptors like Temu and Amazon are maintaining competitive pressure, though the de minimis rule offers some protection for local retailers. And with Walmart opening its first brick-and-mortar store in South Africa, it will be interesting to see how this impacts the retail landscape.
The silver lining: retail categories continue to expand. Statista projects food retail revenue growth of 6.7% annually through 2029, reaching roughly R913bn.
Several high-potential segments are driving the next wave of retail development:
1. Discount retail accelerates
Price leadership remains the strongest lever. McKinsey finds that 76% of consumers are more likely to buy on promotion, while 63% have recently switched to private-label products.
Discount formats are growing revenue twice as fast as total food retail. Usave and Boxer control around 95% of this market, with Boxer opening roughly 1 store a week over the past 3 financial years.
2. E-commerce scales up
Online food retail has surged by 54% annually since 2019. Statista expects South African e-commerce users to nearly double from 11.7 million in 2025 to more than 21 million by 2029. Notably, local online grocery models are showing profitability ahead of global peers.
3. Informal market expansion continues
Retailers are deepening their presence in township and high-density markets – now one of the country's biggest growth battlegrounds. Shoprite's Usave kasi format has sharpened competition with spaza shops and supported nearly 5 consecutive years of market share gains.
4. Food-to-go outpaces grocery sales
Ready-to-eat meals, delivery, and drive-through options are outperforming total food retail growth. Major chains are investing in store-within-store cafés, restaurant-style counters, and meal solutions that boost footfall and margins while encouraging cross-shopping.
5. Retail diversification gains momentum
Retailers are continuously seeking diversification strategies to capitalise on untapped opportunities and market segments, with the likes of The Foshini Group expanding into beauty, while food retailers like Shoprite and Spar are diversifying into pharmacy and pet shops. Another fast-rising trend is retail media – monetising digital and in-store advertising platforms. Globally, this is one of retail's most profitable new revenue streams, and South Africa is catching on quickly.
A cautiously optimistic outlook
The holiday season will be a balancing act: cautious consumers versus improving economic fundamentals. But for retailers who double down on the opportunities, the momentum heading into 2026 presents real upside.
'As the environment stabilises, those who adapt fastest to shifting consumer behaviour will be best placed for sustained growth,' says Keylock.
South Africans may be spending smarter – but not necessarily less. That's a win retailers can build on.
