A survey by The ReDress Consultancy

The green-light for the entry of Wal-Mart into South Africa will no doubt have a negative and positive impact on the retail and clothing sector according to a survey conducted by The ReDress Consultancy.

The rigorous debates, arguments and public input about Wal-Mart's entry into South Africa are well documented. The ReDress Consultancy undertook a snap survey with owners of clothing companies and an industry body to excavate if there were any commonalities in regard to the clothing industry's view on Wal-Mart's entry into South Africa.

Edcon stated, [1] new "entrants to the market could result in lower prices and margins, or a decrease in [its] market share." The lowing of prices may be beneficial to the consumer but this decrease in retail price points could be passed onto manufacturers who are already struggling to meet buyers demand for low costs. Some of the respondents indicated that it was time that South African retailers faced completion from the likes of Wal-Mart.

"Using the most advanced systems of global outsourcing and stock management retailers have created sensational profits from making cheaply and selling expensively." Another respondent conferred, "Our existing chain-stores are making huge profits for their investors and shareholders", subsequently, Wal-Mart, will impact on this sector of the clothing value-chain.

One respondent said that each retailer would have "different views on the market share implications resulting from the Wal-Mart entry", but reiterated what every respondent said when he succinctly articulated, "If the authorities would apply the same vigor to limiting illegal imports as they did to investigating the Wal-Mart proposal we might have a stronger value-chain with broad based benefits for South African workers and consumers."

Another respondent said, "Leaders [are] hiding behind WTO rules and remain paralyzed in dealing with the illegal imports." He went on to say instead of trying to "hammer it out at the Competition Board, [government] should be studying ways of curtailing illegal imports."

There was mixed responses to the impact Wal-Mart would have on the clothing sector with a few respondents having encouraging expectations, while others, said inevitably it may bring the industry, union and bargaining council closer in finding amicable solutions that would make the sector more competitive. A respondent said, the industry is already "destroyed at price levels [so there may have little] impact on the lower end of the market", but due to South Africa's wage structures in the clothing sector and the influence of the union, "bordering countries [may] benefit", as Wal-Mart exercises its slick procurement systems in Southern Africa.

One respondent optimistically said if Wal-Mart does source from local clothing manufacturers it would provide new opportunities for clothing manufacturers and hopefully entice South African retailers to source more locally. The same respondent said job growth would escalate if the industry was able to become more competitive but in order to do this both industry and the union would need to revisit wages, the non-compliant issue and productivity. However, one respondent cautioned being blinded by the size of orders emanating from Wal-Mart. Suppliers are "tempted by the order size, but [will] soon realize upon delivery of goods the discrepancies [will] wipe out any anticipated profit." It is more important said the same respondent for South Africa's clothing sector to compete on design, quality and productivity.


[1] "Edcon raises alarm on Wal-Mart, Zara" , TimesLive, 6 June 2011