Five years ago, the pandemic flipped the world on its head and with it, our financial systems, habits, and priorities. Lockdowns, global supply disruptions, and shifting interest rates reshaped economies everywhere. For South Africans, the way we spend has changed profoundly.

Since March 2020, when SA entered lockdown, we’ve seen some fascinating transformations in how money moves through households. And with that change comes opportunity, new behaviours, emerging trends, and the chance to understand what’s really driving consumer decisions today.

So, what does this new landscape look like? Let’s unpack..

The Essential Spend

Groceries, Medical expenses, house and rent expenses, home and utility, as well as transport and fuel, make up the 5 categories we analysed as essential spending.

The Reign of Groceries

In 2019, rent was the biggest essential expense for South African households. But in the years that followed, groceries surged ahead to claim the top spot. Between 2019 and 2024, average annual grocery spend jumped by 69%, far outpacing rent, which rose by just 21%.

This shift closely mirrors inflation trends. In 2020, CPI hit a low of 3.3%, but by 2022 it peaked at 6.9%, driven largely by rising costs in food and non-alcoholic beverages, along with housing and utilities (StatsSA). Groceries, once a stable category, became a standout driver of essential expenses, and this proves that when it comes to essentials, where one lives is the easiest place to cut expenses when prices go up fast.

Interestingly, by 2024, as inflation eased to 4.4%, grocery spend finally dipped slightly—a small but notable reversal in the trend.

Grocery Spend Hits Harder at the Bottom

While high-income households still spend the most on groceries in absolute terms, with a 28% increase from 2019 to 2024, it’s low-income households that have felt the sharpest impact.

For many South Africans in the lower income bracket, groceries have become significantly more expensive, with average annual spend soaring by 88% over five years. Medium-income households also saw a steep rise at 48%.

Meanwhile, rent continues to dominate essential expenses for both medium- and low-income groups, highlighting how rising food costs are squeezing budgets already stretched by housing.

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🔒 Curious how non-essential spending habits have changed — and what they say about where South Africa is headed?

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South Africa’s gambling industry has undergone a seismic shift over the past two decades. Once limited to casinos and the National Lottery, the sector exploded in scale and accessibility following the 2004 National Gambling Act, which legalised sports betting beyond horse racing and laid the groundwork for online gambling.

Today, gambling is deeply woven into South African consumer behaviour, with the industry hitting R1.14 trillion in turnover in 2023/2024—and sports betting alone contributing R761 billion, or 66.6% of the total market.

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But just how embedded is gambling in South African spending habits? Our recently improved dataset now features more than 640 000 unique South Africans and continues to grow everyday. Within this dataset, a staggering 204 289 unique individuals placed deposits with an online betting company between August 2023 and January 2025—accounting for nearly 30% of all users analysed.

And that’s likely an underestimate, as it excludes voucher-based deposits (such as FNB’s 1voucher system) and cash deposits at branded kiosks. As our dataset comprises roughly 2% of all South Africans with bank accounts, seeing 30% of these active in the gambling space could mean as much as 10 million South Africans have participated in the industry.

With such a significant portion of the population engaged in online betting, the question isn’t just how much money is being wagered but rather who is betting, where they are betting, and how engaging with betting affects their overall spending decisions.

This month, we analyse deposit transactions across major gambling providers and the National Lottery, breaking down the trends, demographics, and behavioural shifts shaping South Africa’s growing gambling economy.

The Growth: Gambling on the Rise

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Our data reveals that the gambling sector continues to expand at an exceptional pace. Looking at the differences between December 2023 and December 2024, we find that the 10 largest online bookmakers recorded a 32% year-on-year growth rate in deposit value and an exceptional 43% year-on-year growth rate in total deposits. For comparison, the National Lottery saw a 13% year-on-year growth rate in total deposits over the same period. 

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The Market Players: Who’s Playing and How Much Are They Spending?

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From the graph below, it’s evident that the National Lottery is still the dominant way in which South Africans gamble, with more than 33% of gamblers in our dataset having bought at least one Lotto ticket within the analysis timeframe. This means that they have 48% more unique customers in our dataset than the closest online gambling competitor - Betway - who managed to capture the spend of almost 23% of all unique gamblers in our dataset. Hollywoodbets closes out the top three, with a 21.7% market share. 

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However, when looking at the total number of deposit transactions made, a very different picture emerges. The National Lottery only accounts for 19.2% of all deposit volumes over the period of analysis. Hollywoodbets is the dominant player by some distance - managing to capture an incredible 40% of all transactions made over the period of analysis.  Betway trails its biggest competitor by some distance, capturing just over 24% of the market by deposit volume. 

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However, it should be noted that National Lottery players aren’t big gamblers. Our data reveals that, despite having one of the highest average monthly incomes (almost R21 000), the average National Lottery player only bets just R48.85 per deposit. This is by far the smallest average deposit size of all the merchants analysed. The next smallest average deposit size was Easybet at R146.22 (almost 3 times the size of the National Lottery). National Lottery players also deposit significantly less frequently than the players at the major online bookmakers. 

Looking at this data, it becomes apparent that the Lotto players are more casual in their engagement—tending to wager small, infrequent amounts as opposed to more frequent and larger deposits seen at the online bookmakers. That being said, a big growth opportunity for gambling providers could be converting casual National Lottery players into more active gamblers.

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Looking more specifically at the online bookmakers themselves, it becomes clear that there is segmentation of customer bases along the lines of income. SunBet - who has the highest income earning average customer at R21 229 -  has positioned itself as a platform for high-rollers, SunBet are likely converting existing casino customers into online sports bettors. Their customers’ deposit sizes are significantly higher than those of any of the other bookmakers analysed, hinting that traditional casino gamblers are transitioning onto digital betting platforms with substantial stakes. 

This notion of SunBet attracting larger, more risk-seeking punters is further cemented when looking at the relationship between how its average (mean) player bets on a monthly basis relative to its median player. You can see from the graph below that SunBet’s average customer bets more on a monthly basis (R3 111) than any other bookmaker’s average player. However, the median spend at SunBet is significantly lower at R200 - which places it in the middle of the pack of the merchants analysed. This large divergence between the mean and median monthly spend suggests that SunBet have managed to capture the attention of serious punters whose large wager sizes have skewed the mean. The implication here is that SunBets currently makes the majority of its revenue from these larger ‘whale’-like players.

Unsurprisingly, the retention and continued loyalty of these players will be at the top of SunBet executives' minds, which may have led to the rollout of its Sun MVG Loyalty Programme. This programme allows online punters to earn points for betting and exchange these points for in-person experience rewards at one of the many Sun International’s casinos and hotels. Cleverly, this allows SunBet to leverage one of its true differentiators among its online bookmaker peers - its holding company’s brick-and-mortar hospitality offering.

Yesplay and Hollywoodbets, on the other hand, have firmly established themselves among earners who earn less than R16 000. These players tend to make smaller deposits but on a far more frequent basis than their higher-earning peers. However, this is where the similarities end—Hollywoodbets is the clear market leader in all aspects, whilst Yesplay is consistently toward the bottom end of the pack of the bookmakers analysed.

Hollywoodbets has the second highest mean spend per customer per month (R3 092) of all the bookmakers analysed. However, unlike SunBets, it enjoys the highest median spend of any of the bookmakers. In fact, Hollywoodbets’ median spend is 28% more than its closest peer on this metric - Lottostar. This suggests that there may be a structural difference between Hollywoodbets and the rest of the market as it appears to enjoy broad appeal by smaller and more prominent players alike. It is consistently best-in-class across the majority of metrics we analysed.

🎲 Curious how betting behaviour differs by income level, age group, and lifestyle — and what it reveals about broader South African spending habits?

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In 2023, South African e-commerce retailers began introducing subscription services offering free deliveries and added benefits, following the global success of models like Amazon Prime.

A year later, our data reveals fascinating insights bringing us to question just how ready South African consumers are to pay for these monthly subscriptions – do they see value and what does this mean for South African retail strategy?

The Evolution of Retail Subscriptions

Membership-based retail shopping went big during the mid-20th century USA, gaining momentum in 1983 with the introduction of Costco and Sam's Club. Today, Costco's $65 annual membership fee generates a massive $4.8 billion in revenue per annum.

Although the total fees made off its 75 million paid members only represent roughly 2% of its total revenue, its real value lies beyond being a revenue source. Its subscription models allow for Costco to:

• Understand changing consumer preferences in near real-time
• Earn more predictable revenue
• Drive enhanced customer loyalty
• Improve inventory management and logistics
  

With these benefits, it’s no wonder subscription-based membership models have become a big focus for the most prominent in-store and e-commerce retailers.

In 2025, Amazon launched Prime with a $75 annual “membership fee” for unlimited fast shipping. Today, Prime serves over 180 million subscribing members. With an unchanged annual fee, same-day shipping, and an expanding suite of products and services – it's unsurprising that subscribers now generate +- $24.5 billion for the company annually.

This evolution from simple delivery benefits to comprehensive service bundles offers valuable lessons for South African entities seeking revenue and customer loyalty opportunities.

Let’s dive into the South African subscription space…

South Africa's Subscription Landscape

This behavioural shift is already taking hold in South Africa. While still in its early stages, the subscription retail market is showing real momentum. Checkers Xtra Savings Plus, Uber One, and Takealot More are leading the way, offering customers a mix of free delivery, discounts, and exclusive deals. Even beyond these major players, South African retailers are exploring new subscription-driven strategies, with initiatives like Proudly South African and Digital Retail Africa 2025 pushing for local subscription services to compete with international rivals.

South African consumers seem ready for this shift. The country’s mobile commerce dominance presents a unique opportunity — subscription models integrated with mobile platforms could reach more customers than ever before. At the same time, economic pressures are making value-driven convenience more attractive, giving retailers a powerful way to drive long-term loyalty.

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📊 Want to see what the data reveals about Uber One and Checkers Xtra Savings Plus?

We analysed South African transaction data to uncover how subscriptions are reshaping consumer behaviour.

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Hi there,

Originally started as a post-Thanksgiving clearance sale, American retailers made Black Friday a global phenomenon. And, although somewhat muted in 2024, overall spending still rose by 3.4% year on year in the US – little growth if one factors US CPI at 2.7%. Nonetheless, Black Friday in the USA was still in the black. But did SA retail see a similar return this year? It’s a mixed bag.

Going into Black Friday in SA, retailers would have been keenly aware of local buyers' crunch and perhaps expected a more conservative buying approach. But to what extent have economic conditions impacted Black Friday in 2024?

To measure the impact of Black Friday on SA retailers, we analysed the 80 days of spending leading up to Black Friday at 28 retailers and compared this to the spending during Black Friday weekend (from Black Friday to Cyber Monday).

A major factor we looked at is just how much the daily spending increased over the Black Friday weekend compared to the 80 days leading to Black Friday – we call this the Black Friday Multiple (BFM).

Let’s dive in.

Emptying wallets before Black Friday?

The average spending across the 28 retailers leading up to Black Friday 2024, increased by 2% from the year before—slightly below the inflation numbers for November ‘24, which came in at 2.9%.

Some retailers made this period count, either through month-long promotions or simply better year-on-year (YoY) performance.

Growth in Spend: 8 Weeks Leading Up to Black Friday

It’s worth noting that both Amazon and Temu were excluded from this graph. These two have seen massive increases in spending, capturing 4% and 5%, respectively, compared to Takealot’s 27% of the 28 retailers analysed.

This is significant for Temu, considering they have only been around in South Africa for a little more than a year.

Percentage of Tracked Spending

How did Black Friday Impact Daily Spend

During the 2023 Black Friday period, the average increase (BFM) in daily spending across all retailers tracked was 179%. But in 2024, it had less of an impact, with Black Friday increasing daily spending by only 134%.

The reduced impact can also be seen by comparing sales and transaction values of 2023 with 2024:

• An 8% decrease in the number of transactions
• A 15% decrease in total spend
• A 1% decrease in average transaction values

Major winners in 2024 include Game Online (384%), OneDayOnly (385%) and CottonOn Online (419%). Takealot saw a somewhat less impactful Black Friday, with a daily spending increase of 166% in 2024 compared with a 254% increase in 2023.

Black Friday Multiple: 2024 VS 2023: Per Merchant

An interesting observation is that while Temu saw a great increase in YoY spending in the period leading up to Black Friday, it’s Black Friday numbers almost look the same as regular daily spending, with only a 37% increase over the Black Friday weekend.

One could argue that with the constant discounts and vouchers offered on Temu, customers might have become “immune” to additional offers such as Black Friday. Discounts become part of the expectation, and it makes seasonal promotions hard to identify.

The low Black Friday impact for Temu could also be due to customers reserving Black Friday purchases to buy bigger ticket items (TV, Fridge, etc). Massmart Online, Game Online and Makro Online average transaction values of R3’380.22, R3’075,23 and R3’403.98, respectively, seem to motivate this behaviour.

📉 Curious which retailers actually won Black Friday in 2024 — and who felt the biggest drop?

We analysed real spend data across 28 South African retailers.

Sign up to Reveal Insights to see the full breakdown — and get fresh, actionable retail intelligence every month.

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In Summary:

• Strong retail performance: September’s sector-wide rise in consumer spending  signals a positive shift in consumer confidence.
• Macroeconomic boosters: Recent finance announcements strengthen financial security and spending power - potentially amplifying past Q3 spending trends.
• Grocery: Consumer wellbeing continues to drive decisions with Vitality’s partner switch positioning Checkers as stronger than ever.
• Apparel: “More pocket, same mindset”, with value-for-money brands emerging as clear winners in the clothing sector.

September Sector-wide Wins

September 2024 has been a strong month for South African retail, with most sectors experiencing YoY spending growth. When compared to past year’s results however, we see a steep increase in August to September spending.

We dive into the macro factors  influencing consumer spending below.

Growth in Spend per Category

SA Optimism on the Rise

News of the South African Reserve Bank initiating its monetary easing cycle with a 25 basis point cut in September has eased the debt burden on consumers and increased their disposable income. This, paired with a three-year low in inflation and September marking the fourth month of consecutive fuel price cuts - has added to the general air of economic optimism in the country.

Other factors, including the strengthening of the Rand against international currencies, has reduced import costs - with the potential to decrease retail prices. Although the effects of this haven’t been seen in the apparel sector yet, the stronger rand has already boosted pharmaceuticals and tech hardware imports.

The new two-pot system however, may have the largest immediate impact on consumer spending. The government has reported that withdrawals have already reached R21 billion, with analysts highlighting that 24% of this has been spent on home and vehicle expenses and a further 11% designated toward day-to-day expenses.

In fact, the Reserve Bank estimates the two-pot system could add 0.1% and 0.3% to GDP growth for the country in 2024 and 2025. A massive boost to SA consumers' pockets, with the potential for an additional R2.3 billion per month in the near future.

Overall, positive economic indicators are boosting consumer confidence and our data suggests these factors have likely boosted retail spending.  

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📈 Want to see which retailers actually benefited from the September retail boost — and what Checkers, Woolworths, and Pep are doing right?

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In Brief

• August data indicates that spending for most retail sectors is on the decline, highlighting potential shifts in consumer behaviour.
• Despite the growth in online shopping, in-store sales continue to play a significant role in retail performance.
• Data suggests that retailers with strong in-store and online channels may be outperforming those focusing on a single channel.
• We explore how an omnichannel approach could drive the competitive advantage needed to dominate online-only entrants.

August brought notable shifts in consumer spending across retail categories. Our latest data reveals declines in most sectors, with intriguing exceptions that warrant a closer look.

Growth in Spend per Category

Virtually all retail categories (eating out, general merchandise, groceries, media and pharmacy)  experienced a drop in sales growth YoY from August 2023 to August 2024. Apparel is the notable exception: Despite being the worst-performing in total growth year-over-year, it was the only category to maintain stable spending over the period.

Media spending saw a significant drop, from the highest growth in 2023 to the second lowest in 2024. The steep drop could indicate a shift in South Africa’s media consumption, potentially reflecting dramatic declines in media subscriptions like DStv, and increased adoption of free social media platforms.

Inflation and economic pressure could also be causing consumers to cut back on discretionary spending in categories like eating out and media. It’s certainly why consumers and retailers alike will be delighted by the Reserve Bank’s September 2024 interest rate cut of 25 basis points and also tracks with the trend of living essentials such as groceries seeing the most growth in spending.

The challenge for retailers will be to adapt to these changes in consumer behaviour while seeking growth. And this could be where the omnichannel approach becomes vital…

The Omnichannel Advantage

Omnichannel retailing refers to providing a seamless shopping experience across both online and offline channels. It endeavours to meet consumers where they are, which in the pandemic and immediate aftermath was definitely online and at home.

However, four years on, and with numerous online-only players entering the scene, there’s reason to believe that the physical store is not dead. It could even be a vital element in making e-commerce truly viable.

Data shows that retailers like Checkers, Bash and increasingly Woolworths, which all have strong online and in-store offerings, outperform competitors.

When comparing grocery in-store versus online growth in market share over the past year, delivery outpaced in-store. But zero in on just the last 3 months and you’ll see that in-store gained almost 3X market share compared to delivery in the short term.

Market Share: Grocery In-Store VS Online

While Delivery has certainly seen the most growth over 12 months, look at In-Store (in green); it saw the most growth over the most recent 3 months – the physical store remains a strong and vital part of retail.

And let’s not forget that in-store still accounts for the lion's share of the overall market in South Africa – 67% versus online’s 11% – meaning that if you’re strong in-store, you likely have the continued income and ability to invest in developing your e-commerce business.

🛍️ Curious which retailers are winning the omnichannel race — and how Checkers, Woolworths, and Bash are holding their ground against global challengers like Temu and Shein?

Subscribe to Reveal Insights for full data breakdowns across SA’s top retailers — and monthly access to competitive performance dashboards, market share trends, and category shifts.

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Welcome to the free version of our newsletter that analyses themes emerging from our live Market Reports. The client version of this Shop Talk includes:

• Access to the Market Reports.
• Analysis of general spending trends across the major retail categories during June 2024.
• Real-time spending data for Clicks’ and Dis-Chem’s online channels, showing potential for growth.
  

As a taste of what to expect, here’s a look at how spending trends at South Africa’s two biggest pharmacy chains.

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The retail pharmacy market is more concentrated than any other category we track. Just two companies – Clicks and Dis-Chem – account for the majority of 22seven user spending in this category. It’s also worth remembering that Pharmacy is different to other spending categories because the customer is not always the one paying. Medical aids and insurers often fund a customer’s medicine purchases from a pharmacy. The retailer reports this transaction as a sale but the transaction doesn’t appear on a user’s bank statement.

Disclaimer done, it’s still interesting to segment the category into Clicks, Dis-Chem and ‘Independent Pharmacies’. The ‘Independent’ grouping includes chains like Pharmacy @ Spar, Shoprite’s Medirite, Dis-Chem-tied The Local Choice, Alphapharm and a sizable number of smaller pharmacies.

Interestingly, growth in the Independent sub-category didn’t follow the same upward  trend as the rest of the category in June. This could be due to the widening gap in the sector between the two dominant chains and the rest. Dis-Chem and Clicks generally stock a wider range of non-dispensary products, and that selection is growing. Note, too, that Dis-Chem and Independent Pharmacies experienced more pronounced fluctuations in spending growth, with significant spikes and declines. In contrast, Clicks has shown a more stable trend with less variation.

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SPENDING GROWTH: RETAIL PHARMACY

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Battle of the giants

Cash-flush Clicks, which has earmarked nearly R1bn in capital investment for the 2024 financial year, plans to open as many as 55 new outlets, increasing its store base to more than 1,200 in the long term. The group has also invested in a dedicated e-commerce warehouse that can deliver more than 1m parcels per annum to consumers.

This dovetails with the new Clicks app: shoppers can access most products they would find in-store, track their orders and check their ClubCard points. Other features include the ability to submit scripts, make clinic bookings or chat to a pharmacist. With a 4.6 star rating on the Apple App Store, it seems that consumers are enjoying the user experience.

Dis-Chem has also been busy. With a new CEO and an equally ambitious expansion plan, the group aims to open about 140 stores in the next three years. (Clicks currently still has a significantly larger footprint with ~900 stores nationally, compared to Dis-Chem’s ~270.)

Against that backdrop, let’s look at user spending across the two chains. Our 22seven data favours Dis-Chem, whose market share is 56% compared to 44% for Clicks across the demographic spectrum. Probably due to its bigger store footprint, Clicks has a higher number of customers transacting monthly, but these customers transact less frequently than Dis-Chem customers, and they spend less each time. Dis-chem’s smaller overall number of users spend significantly more per transaction, which accounts for the group’s greater market share.

Note that the 22seven user base is skewed towards middle- and higher-income earners, and Dis-Chem’s market share increases as income increases. (For users earning R60k+ pm, Dis-Chem’s market is ~60%; in the R15–25k pm demographic, market share is closer to 50%.) The same pattern is observed when we segment for age: older users tend to prefer Dis-Chem, whereas Clicks appeals to a younger user base.

The chart below takes an average across the demographic spectrum and compares the two retailers on user base size, total monthly spend, market share and average transaction value. Importantly, even though the average transaction value at both retailers increases slightly every month, there’s no evidence yet to prove the success of either retailer’s expansion strategy.

Online is where it’s at

Over the last few months, we’ve done extensive reporting on how online-only retailers like Shein and Temu have disrupted the local market, and how local businesses like Checkers Sixty60 have attempted to level the playing fields. The Covid-19 pandemic fast-tracked online growth. While most local retailers have some sort of online strategy, some have been far more successful than others.

In the pharmacy space, Clicks seems to be taking the lead in this regard. Although online shopping at both Clicks and Dis-Chem is still a very small component of total spend among our users, the trend is almost the opposite of what we see in-store: Clicks is ahead of Dis-Chem on almost every metric, by a long way…

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The full report is available to clients. Contact us to learn how you can access research via your broker or subscribe directly. To see more of what we do, click the links below.

In brief
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• In May, international giant Amazon quietly stepped into South Africa's e-commerce space. Despite its launch drawing initial skepticism, early data indicates a promising start – and a sizeable increase in market share in the General Merchandise category.
  

• Checkers Sixty60 continues to drive innovation with it’s BETA app, adding Checkers Hyper products to its 60-minute delivery service. Increased sales within select Cape Town suburbs reveal the potential value of Q-commerce (quick commerce) to a greater market segment.
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If you’ve read our recent reports, you’ll be familiar with the extensive impact that Chinese e-commerce sites, Shein and Temu, have had on South Africa’s online retail landscape. And let's not forget about the launch of Amazon South Africa...

Even though there are ongoing legal battles to regulate import taxes and protect local suppliers, local retailers have still been forced to shift their approaches to reassert dominance and differentiate themselves from their international rivals.

Let’s take a look at what’s been happening…

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The sleeping giant wakes

Amazon South Africa officially launched on 6 May 2024, but the response was underwhelming. Some sources in the media criticised the brand for forgoing its unique products, including the beloved Kindle e-reader, Fire TV, Ring video doorbell and Amazon’s famous Alexa. In addition, buyers were faced with 'out of stock' notifications during checkout.

Despite this, among the South African users we track, there were more purchases at the local Amazon in May than on Amazon international for the the whole year.

Amazon’s combined May figures not only record the highest number of users across the entire 2024 period, but reveal that the brand’s market share in the General Merchandise category has doubled.

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USER NUMBERS: AMAZON.COM vs AMAZON.CO.ZA

Interestingly, despite Amazon South African having a greater number of users, Amazon international users transacted more frequently. Average basket value on the local site matched competitors like Takealot and Makro.

Reveal’s data suggests that local retailers should remain vigilant in upcoming months. The next few months will tell if Amazon South Africa's 'quiet' launch was in fact the formidable foe just biding its time...

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Checkers Sixty60: Hyper-fast in Cape Town

Checkers has always been at the forefront of all things e-commerce in South Africa, and this latest development is no exception: They're challenging Takealot’s new offerings in the General Merchandise space with an all-new app of their own. Users in select Cape Town suburbs can now order general merchandise from Checkers Hyper and get it delivered within 60 minutes via the Checkers Sixty60 app.

We analysed all users who regularly shop on  Sixty60, and we identified the customers transacting in the suburbs where the new Beta app is available – to account for other outside variables and measure the potential effect of selling Hyper products on the Sixty60 app.

The number of customers using the  Sixty60 app in these suburbs increased in May, despite a noticable decline in the overall Sixty60 user base since March.

PERCENTAGE CHANGE:  NUMBER OF SIXTY60 USERS

When it comes to average transaction value and number of transactions per user, both metrics showed minor changes from April to May. For the target  users on the Beta app, both metrics increased; for the users of the regular app, average transaction value decreased slightly while average number of transactions increased slightly.

The total spend for users in suburbs where the new app was rolled out reached its highest value for the year in May. Although the total spend for the entire base also increased in May,  growth on the regular app was less than half of that observed for the Beta app.

In summary, the early data suggests that customers using the beta version of Sixty60, with access to a far wider range of products, are likely to shop more frequently and spend slightly more each time, compared to the customers using the original app.

Time will reveal a more complete picture in the months ahead. Watch this space...

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PERCENTAGE CHANGE IN TOTAL SPEND: SIXTY60 USERS

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Takealot  jumps on the subscription bandwagon

In Mission Possible, we analysed the effectiveness of Checkers' new Sixty60 subscription service. Now Takealot has  thrown its hat into the ring with TakealotMORE – a similar subscription service where users can access  unlimited free deliveries from Takealot and parter delivery services like  Mr D and Pick n Pay asap!

On 13 May, TakealotMORE launched with a free 7-day trial, followed by unlimited free next-day deliveries for just R39 a month or R99 for a premium subscription with no minimum spend.  

We segmented users who subscribed to TakealotMORE  in May and compared their spending at Takealot, Mr D and Pick n Pay asap! before and after signing up for the subscription service.

The results are fascinating...

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The full report is available to clients. Contact us to learn how you can access research via your broker or subscribe directly.

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In brief
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• Xtra Savings Plus is a subscription service offered by Checkers, which gives shoppers unlimited Sixty60 deliveries and a one-off 10% discount on an in-store purchase per month. The introductory price is R99pm, discounted from R149pm.
  

• Our data shows that XSP has been successful so far, at least from a customer perspective. Retention is high and the service is popular among older, high-income shoppers.
  

• We analysed a cohort of XSP subscribers to see how their grocery spending in March and April 2024 compares to grocery spending during the same period in 2023. Average spend at Checkers among this cohort increased by 28% to R5,617pm, and the average number of Sixty60 orders increased by 44%.

• When it comes to profitability, however, the numbers for XSP are less convincing. We estimate gross profit may increase by 9% if XSP subscribers do not take up the in-store discount. If they do, gross profit may decline by 5%. Ultimately, we think that XSP is a ‘prime’ example of local retailers adapting to growing international competition.

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Towards the end of last year, Checkers launched their Xtra Savings Plus subscription service. You probably remember the ad: a faux Tom Cruise in all his greatest moments (although sadly not as Stacee Jaxx), spending and swiping and saving the world.

For an introductory offer of R99pm, discounted from R149pm, subscribers could access unlimited Sixty60 deliveries, plus an additional 10% saving on one in-store purchase per month.

‘Xtra Savings Plus’ is quite long and complicated, so we’ve abbreviated it to XSP. In this research note, we’re going to evaluate the profitability of XSP as a subscription service. Using a new retention model, we’ll see how it stacks up against other leading consumer subscription services like Netflix and Spotify. Drawing on our unique real-time spending data, we’ll also highlight which shoppers are using XSP, and how XSP has affected their purchasing behaviour.

In the end, we’ll hopefully have enough inputs to answer the question that all analysts and competitors should be asking: Is the Xtra Savings Plus subscription model profitable for Checkers?  

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Customer retention

In case you’re wondering why we’re comparing XSP to Netflix and Spotify (and Showmax, for local flavour), it has to do with the word ‘subscription’. The subscription business model has become synonymous with media streaming services, even as it has spread to other services. Comparing on this basis is not perfect, but it does provide a benchmark to evaluate how successful XSP has been so far.

To be clear, XSP is not yet in the same league as Netflix and Spotify. The number of South Africans subscribing to the major global media services is orders of magnitude larger. Netflix is the big daddy, with c7.6 subscribers for every one XSP subscriber in the sample.

But what about Sixty60 users and Checkers in-store shoppers? Including these metrics gives more context to the research and helps to scale the samples.

So, here’s what we’re looking at: There are about the same number of Spotify subscribers in the sample as there are Sixty60 shoppers, and 1.5 (standalone) Showmax subscribers for every XSP subscriber. The number of Checkers in-store shoppers is many times larger than any subscription service.

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RELATIVE SIZE: NUMBER OF SUBSCRIBERS/SHOPPERS TO EVERY XSP SUBSCRIBER

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We’re specifically interested in how these services retain their customers, month to month. By our definition, retention means the proportion of last month’s customers who subscribed again this month.  

From the chart on the next page, it’s clear that customers are loathe to give up their Netflix and Spotify subscriptions. Nearly 95 out of every 100 customers prioritise paying their subscriptions to these services each month. (No wonder credit bureaus around the world are searching for alternative measures, like subscription payment profiles, to offer differentiated credit scores and increase access to credit.)

XSP’s retention level is just below this high-water mark. Currently, nine out of ten XSP subscribers maintain their subscription on a month-to-month basis. Showmax’s retention, by comparison, is a little lower at ~83%.

In general, we note that retention seems to fluctuate fairly predictably. The rate weakens in the early part of the year, maybe as a result of consumers struggling to maintain their festive season splurging.

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CUSTOMER RETENTION RATE: JAN 2022 – APRIL 2024

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Who subscribes to Xtra Savings Plus?

In previous reports, we have shown that on-demand grocery delivery is most popular among mid- to high-income, predominately middle-aged users – the time-starved working families or professionals who can afford not to go to the supermarket.

Our most recent spending data shows that XSP exaggerates this trend and appeals to the Sixty60 super fans. In other words, a Sixty60 shopper is likely to be relatively wealthy and they’re likely to fall into the 35–45 age bracket. XSP subscribers are even more likely to earn in a higher bracket and more likely to fall into the 35–45 age bracket.

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SIXTY60 USERS AND XSP SUBSCRIBERS, BY INCOME AND AGE

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Convenience, delivered

Now that we know who subscribes to XSP, let’s see how unlimited delivery has affected their purchasing behaviour and whether a subscription model can be a profitable business for Checkers.

The best way to measure the effect of XSP of consumer behaviour is to take today’s XSP subscribers, review their current grocery spend, then look back in time and compare how they were spending this time last year.

Fortunately, that’s exactly what Reveal can do.

From the sample of XSP subscribers, we identified a sub-sample of 1,770 XSP subscribers with uninterrupted transaction data that allows us to compare March and April spending between 2023 and 2024.

We looked at all spending at the four major grocery retailers over this period. The average total grocery spend by today’s XSP subscribers has increased by 10% to R11,250 pm.

These shoppers were already regular Checkers shoppers. Since subscribing to XSP, their spending at the retailer has increased even more. In 2024, among this user sample, Checkers accounted for 50% of the average total monthly spend on groceries – an increase of 7 percentage points (pp) over 2023. Average spend at Checkers by XSP subscribers increased by 28% to R5,617pm and the number of Sixty60 orders increase 44%.

Interestingly, however, the average Sixty60 order value among this cohort declined 10% to R432 (more on that later). In-store visits and average maximum in-store purchase values also decreased.

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Can Xtra Savings Plus be profitable?

Checkers’ spending share gains have been won in equal amounts from all of the other major grocery retailers. In this particular consumer segment, Woolworths has the second largest share (-2pp on 2023 share), followed by Pick n Pay (-3pp) and Spar (-2pp).

Of the R11,250 that these XSP subscribers spend on groceries each month, they spend R5,617 (50%) at Checkers. Sixty60 accounts for 37% of that spend – an increase of 10pp over 2023.

From this data, it’s clear that Sixty60 accounts for all the increases in total spending at Checkers for this cohort. (In-store sales actually declined, as did in-store shopping trips.) With the licence to summon unlimited baskets to their door, the average number of Sixty60 orders has increased by 44% – from 7 orders to 10 orders per customer per month – even as the average order value has decreased by R46 (10%) to R432. (Much of that decline can be explained by no longer having to pay the R35 delivery fee…)

Finally, the maximum average transaction value (ATV) per customer is ~R1,260. Maximum ATV is relevant because we think it’s reasonable to expect that XSP subscribers use their monthly 10% in-store discount for their highest-value purchase.

From the customer’s perspective, an XSP subscription appears to be a significant benefit. Instead of spending R243 on delivery fees (7 * R35), they spend just R99 and order more often. Total spending at grocers has increased by 10%, roughly in line with inflation over the period, so the monthly saving of R144 equates to c1.3% of monthly grocery spend.

Checkers has clearly won share of spend that will support revenue growth, but what do these findings imply for profitability?

The table on the following page estimates the profit impact of XSP from Checkers’ perspective.

In 2023, the cohort under review were spending an average of R4,402pm at Checkers. During the same period in 2024, they spent R5,617 – an increase of 28%. After VAT, delivery and subscription fees, these customers are spending a total of 33% more on groceries in 2024.

The main assumption is what the average gross profit margin might be for a Sixty60 order. If the Shoprite Group gross margin was 24.1% in FY23, we’d assume the contribution from a Sixty60 order should be higher – more branded items and more fresh produce in the basket. With that in mind, we’re assuming a 25% gross margin on a Sixty60 order.

At that margin, Checkers’ average gross profit per customer in 2024 is 33% (or R295) higher than in 2023 (assuming Checkers foots the bill for the same cost per delivery – R30.50 after VAT – net of the subscription received). If we were to stop there, Checkers’ estimated gross profit per customer would be up 9%, or R77.

But XSP subscribers also get the benefit of an extra 10% off an in-store purchase. Not all subscribers will redeem this benefit, however. The average XSP subscriber is shopping less in-store and there are additional actions that he or she must undertake to redeem the discount. (Such actions typically cause conversion rates to fall.) The worst case for Checkers is if every subscriber redeems the discount on their highest-value purchase each month (~R1,261). If that were the case, then our estimate implies gross profit per XSP subscriber declines by 5%. By the same logic, Checkers will break even if less than 61% of XSP subscribers do not redeem their in-store discount.

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What does the future hold?

Our data suggests that XSP has been a hit for customers: Retention is high and stable, and the service offers meaningful customer value.

But the evidence of profitability for Shoprite shareholders is potentially less definitive. XSP is almost certainly driving stronger market share and revenue gains among higher-earning customers. This is a known strategic objective for the company and it might translate into gross profit growth between -5% and +9%. Inevitably, investors will complain that XSP is diluting margins while management will argue that they’re banking rands not percents.

There are other factors to consider:

• Sixty60’s effect on trading profit is still uncertain. For example, ‘dark stores’ or mini distribution centres are popping up – these service Sixty60 orders only. There’s one such ‘dark store’ close to Reveal’s offices in Cape Town. It’s like a beehive, with bikes coming and going at high frequency. The seemingly higher trading density and obviously lower occupancy cost might well translate into better trading margins than the average Checkers store.
  

• Strategically, an XSP subscriber is now even more immersed in the Checkers/Shoprite ecosystem. They’re tied to the points balance on their Xtra Savings card and they’re hooked on the convenience of Sixty60 delivery. We argued in Grocery Games that Sixty60 would inevitably expand into a larger general merchandise offering – something that is now happening. As Amazon launches in South Africa, perhaps an XSP subscription is the best defence against this giant retailer hitting its ‘prime’ on our shores…