A Survey by The ReDress Consultancy

The approval for Wal-Mart's entry into South Africa has generated both positive and negative expectations within the retail and clothing sector, as revealed in a survey conducted by The ReDress Consultancy. The survey targeted clothing company owners and an industry body to gauge the sentiments regarding Wal-Mart's impact on the South African clothing industry.

Edcon expressed concerns, noting that new market entrants like Wal-Mart could lead to lower prices, reduced margins, or a decline in market share. While lower prices could benefit consumers, there are apprehensions about the potential impact on manufacturers already grappling with meeting demands for lower costs. Some respondents felt that competition from global players like Wal-Mart was necessary for South African retailers.

The survey highlighted that existing chain-stores in South Africa were generating substantial profits for investors and shareholders. Respondents emphasized the need for authorities to address illegal imports with the same intensity given to scrutinizing Wal-Mart's entry. There were diverse opinions on the potential impact, with some foreseeing positive outcomes such as increased opportunities for local manufacturers, job growth, and enhanced competitiveness. Others cautioned against being overly optimistic about large orders from Wal-Mart, emphasizing the importance of competing on design, quality, and productivity within the South African clothing sector

A further respondent echoed the sentiments for South Africa's low productivity output by saying, "labour legislation [coupled] with a bureaucratic system has created a lackluster work ethic [resulting] in a culture of low productivity [which makes South Africa less competitive] than similar emerging markets." The same respondent reiterated the view that if South Africa's clothing sector was able to rejuvenate its productivity and competitiveness, "local retailers would resort to purchasing locally and the quicker turn around and understanding of local conditions would give them an edge against the colossal giants like Wal-Mart." However, one respondent indicated that competition between local retailers and Wal-Mart could escalate into a price war which will negatively impact on the clothing sector. "I am not sure how further down prices can go. They [Wal-Mart] are very price sensitive and it would be an immense challenge for clothing manufacturers to meet their price-points."


Most respondents said that the union and bargaining council would "have their hands full" dealing with Wal-Mart, while most felt that the union was focusing for too much on political issues rather than the welfare of it members and subsequently the clothing sector. "They [the union]", said one respondent should be looking at "realistic labour regulation that is user friendly, and is void of antiquated ideals, as is being played out presently in Newcastle." Another respondent stated that South Africa cannot isolate itself from the "global village", however; the current discourse in labour regulations and the actions of the Bargaining Council is not making South Africa's clothing sector a viable contributor to job creation.


Evaluating the responses, it is clear that the entry of Wal-Mart will have an operational impact on the retail sector, however, the consequences of such an impact on the clothing sector is debatable with most respondents affirming that South Africa's clothing sector has the potential to entice more local procurement if it realigns itself to global productivity and delivery standards but this can only be achieved through strengthening skills, productivity output and restructuring wages as has been promulgated by non-compliant clothing companies.


The ReDress Consultancy, 6 June 2011


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