Retail Expansion in South Africa

We’re worth it

South Africa’s market offers avid consumers and a stepping stone to the rest of Africa. This is especially true for big global brands, Two months after opening, Starbucks in South Africa still pulls impressive queues on weekends. Famous worldwide brands are a bit of a novelty in South Africa. Similarly enthusiastic crowds met the launches of the first Krispy Kreme Doughnuts and H&M clothing shops in Africa late last year. Burger King, which opened in 2013, had long queues for months.

At  the first Starbucks shop south of the Sahara, a queue snaked throughout the store, winding out of the door and down the block. It greeted the American coffee chain’s boss, Howard Schultz, when he visited the Johannesburg store for the first time recently. “I have actually been to many, lots of Starbucks openings around the world,” Mr Schultz marvelled. “I have actually never seen a line like this after a week of our opening.” Few of the South Africans shuffling in line had ever tasted Starbucks, but they felt sure it was worth the hour-long wait. “Celebrities are always drinking it,” said Lebo Nkosi, 26, a shop assistant at a nearby mall, as she waited with her friends.

The appetite for venti lattes and grande frappuccinos is remarkable given the parlous state of South Africa’s economy. It is expected to grow just 0.6% this year, down from 1.3% in 2015. So far, though, this hasn’t stopped the country’s aspirational middle class from splurging. When the spiffy brand-new Mall of Africa (residence to South Africa’s second Starbucks shop), opened in late April it drew more than 120,000 people and snarled up traffic for miles. It also led to a shoot-out between rival taxi fleets, fighting over who would certainly get to pick up shoppers.

Not all who splash out on luxuries are truly well-off. lots of of the brand-new middle class are living beyond their means. According to the South African government, nearly half of South Africans with access to credit are struggling to meet their monthly payments; they may have actually to stop spending.

Though retail sales beat expectations by rising 4.0% year-on-year in February, they disappointed by growing just 1.5% in April. Burger King opened with a sizzle, but has actually since scaled back its plans, from 100 stores by the end of June to 75 or 80. With the Mall of Africa’s opening, there could be a glut of retail space. Starbucks was planning to expand slowly. But after seeing the crowds in Johannesburg, a bullish Mr Schultz had second thoughts: “I think this market is going to be larger than we probably thought.”