Depleted savings, high food prices forecasted to impact retail business growth in 2024
KENYA – Despite the challenging economic environment, Kenya’s retail businesses are expected to continue growing in 2024, albeit with specific challenges.
According to the Retail Trade Association of Kenya (RETRAK) CEO, Wambui Mbarire, shifting consumer trends, rising commodity costs, and diminished household savings are likely to dampen the growth prospects.
Mbarire highlighted that factors like depleted savings, a weakened local currency (shilling), and increased commodity prices will play a significant role in shaping the projected growth.
“These challenges reflect global research conducted by the Economic Intelligence Unit (EIU), which points out that the future of retail businesses, especially in developing economies, is promising, with a slowdown in inflation expected to support volume growth,” she noted.
However, EIU’s report also emphasized that despite the projected growth, depleted savings and high food prices will continue to influence consumer behaviour.
“Households have depleted much of their savings on the back of the rising cost of living, so they will remain highly price-sensitive,” the report noted.
Meanwhile, some retailers have already started to relocate from traditional business hubs to residential areas, aligning themselves with customers who are changing their shopping habits, and prioritizing food items over other household amenities.
Retailers are moving from hypermarkets to localized supermarkets to meet these evolving consumer needs.
In addition, the report suggested that retail businesses will need to innovate and refine their product offerings to foster brand loyalty and retain customers.
According to EIU, global retail sales are expected to grow by 6.7% in terms of value and by 2% in volume in 2024.
The expansion in developing markets is expected to lead to double-digit growth in global online sales. However, online retailers are likely to face profit pressure due to regulatory challenges in the sector.
The report highlighted that jobs in the retail sector may face additional challenges. It further predicts a shift in consumer preferences, with more people returning to physical shopping, moving away from the online shopping that characterized the retail sector in 2020.
“Consumers’ preference for shopping at brick-and-mortar stores will bolster offline retailers, especially discount retailers.”
This shift back to physical shopping is also expected to be driven by consumers’ search for lower prices, reluctance to pay delivery fees, and the prioritization of basic goods like food.
The report also highlighted that declining food and beverage commodity prices are anticipated for the better part of 2024.
However, it noted that disinflation may not provide substantial relief for consumers as labour costs in the retail and warehousing sectors are expected to continue rising.
