Why Discount and Factory Shops Are Booming in South Africa

Karen Scheepers
Apr 30
6 min read

Updated: May 4

South Africa is witnessing a marked rise in discount stores and factory shops, as cash-strapped consumers hunt for bargains to cope with tough economic times. Once considered niche or low-end, these outlets have surged in popularity across the country.

A combination of economic pressures, from soaring living costs to high unemployment and shifting consumer behavior has fueled this trend. In parallel, evolving attitudes toward bargain shopping and the amplifying effect of social media have helped entrench a new culture of savvy savings. The following analysis explores the market forces behind the growth of discount and factory shops in South Africa.

Economic Pressures Squeeze Consumers’ Budgets

South Africans have been hit by a cost-of-living crisis that leaves them little choice but to seek cheaper shopping options. Inflation has driven up the price of basic necessities at rates exceeding general inflation, for example, food prices in 2023 were about 8.2% higher year-on-year, straining household budgets already stretched by fuel and transport costs reuters.com.

Even as overall inflation hovered around 6% for the year, consumers felt the pinch in everyday expenses. Compounding the pressure is persistently high unemployment. The jobless rate remains stuck at roughly one-third of the workforce (over 32% as of 2023)dhl.com, meaning millions of South Africans have limited income. Even many with jobs have seen minimal wage growth against rising expenses, effectively shrinking their spending power.

With finances under such strain, consumers are forced to prioritize essentials and make every rand count. For many families, buying premium brands at full price has become a luxury they cannot afford. Discretionary purchases are postponed or eliminated as wallets tighten. Instead, shoppers are budgeting more strictly and embracing any opportunity to save, including turning to outlets that offer goods at a discount.

In this environment, factory shops, which sell manufacturers’ surplus or out-of-season stock at lower prices and dedicated discount retailers have become critical lifelines for stretching paychecks. These economic realities lay the groundwork for the discount retail boom: it is fundamentally a story of necessity in the face of hardship.

Shifts in Consumer Behavior Toward Value

Under pressure, South African consumers have dramatically changed how and where they shop. Nearly everyone is adjusting habits to navigate the cost-of-living crunch, a recent survey found that 99% of shoppers have altered their shopping approach in some way to survive rising prices reuters.com. Shoppers are far more price-conscious than before, willing to forgo brand loyalties and conveniences if it means getting a better deal. Many now plan purchases around promotions, bulk bargains, and cheaper alternatives.

In fact, roughly 40% of South Africans report they are shopping more often at discount stores than they used to reuters.com. Instead of automatically visiting a favorite supermarket or mall, consumers are “store switching”, scouting multiple outlets to find the lowest prices. According to retail analytics data, about 41% of consumers recently changed their usual shopping venues or routines specifically to better manage expenses it-online.co.za. The hunt for value has become a driving force in purchase decisions.

One notable behavioral shift is the growing acceptance of private labels and off-brand products. Nearly half of consumers (48%) now believe that store-brand or unbranded goods are good substitutes for name brands reuters.com, reflecting an erosion of the notion that only big brands guarantee quality. Shoppers are also focusing on essentials and cutting back on non-necessities: a mid-2023 consumer outlook noted that 46% of households were buying mostly necessities and avoiding extras. When they do buy non-essentials, they increasingly wait until those items go on sale.

A study by McKinsey & Company found many consumers actively delay purchases until retailers announce discounts, making patience a cost-saving strategy bizcommunity.com.Crucially, bargain-hunting behavior has become proactive. Consumers aren’t just stumbling on deals, a large share are actively seeking them out. By one estimate, 60% of South Africa’s “cash-strapped consumers” regularly look for coupons, specials, and promotions to offset high prices. This might mean browsing sales flyers, comparing prices online, or joining social media groups that share tips on discounts.

Even the psychology of shopping has shifted: scoring a great deal now comes with a sense of accomplishment or even excitement for many shoppers. Retail researchers note that landing a bargain can trigger a “feelgood factor,” with over one-third of people reporting genuine excitement when they save money and a majority feeling like smarter shoppers for doing so bizcommunity.com. In short, frugality has become a mainstream consumer mindset. South Africans are more value-driven and promotion-sensitive than ever and discount and factory stores directly cater to that mindset by positioning themselves as the homes of low prices.

Supply Chain Surplus Feeding the Factory Shop Model

Another factor underpinning the rise of factory shops is the abundant supply of surplus goods that need to be sold cheaply. In both local and global supply chains, excess inventory and unsold stock have increasingly found their way into discount channels. Manufacturers often produce more goods than the regular market absorbs, whether due to forecasting errors, canceled export orders, or seasonal demand swings.

Rather than let this surplus go to waste, many suppliers offload it through factory outlets and clearance stores at heavily reduced prices. These shops sell items that may be last season’s fashion, end-of-line appliances, or products with minor imperfections, all perfectly usable goods, but outside the full-price retail cycle. Consumers have caught on that a “factory store” price doesn’t necessarily mean inferior quality; it often means the same product, just being sold in a no-frills way.

South Africa also benefits from global oversupply trends. In recent years, international markets have been pushing excess consumer goods into Africa, creating opportunities for local discount retailers. Industry experts observe a “wave of liquidation stock from the US and Europe” flooding into African countries, essentially, massive volumes of surplus products from abroad that need secondary markets howwemadeitinafrica.com. Retailers in developed countries frequently end up with a glut of inventory (for example, when trends shift or economic slumps leave stock unsold) and have started looking to Africa as a destination for these goods.

As a result, South African traders can procure internationally branded items or bulk goods at pennies on the dollar and resell them to the public at prices far below normal retail. This dynamic is evident in the informal sector: local spaza shops (small township convenience stores) now source much of their merchandise from internationally liquidated stock, passing on bargains to customers in low-income communities howwemadeitinafrica.com. In the formal sector too, new businesses have emerged specifically to handle stock liquidation and wholesale of surplus goods to discount outlets.

For example, online platforms have launched to connect bulk sellers of overstock with South African entrepreneurs, allowing factory shops and independent discounters to easily buy excess inventory ranging from clothing to electronics. The availability of cheap supply has enabled more discount stores to pop up and remain well-stocked. Whether it’s a warehouse full of last year’s fashion line or a pallet of canned foods nearing their sell-by date, these surplus goods can be sold at a fraction of their original price while still yielding a profit for the discounter.

In essence, supply chain inefficiencies and overproduction are being converted into a win-win: consumers get access to lower-priced merchandise, and businesses find a market for goods that might otherwise have been discarded. The steady flow of surplus stock, both local factory overruns and imported clearance goods, provides the fuel that keeps South Africa’s factory shops humming.

From the retailers’ side, the success of the discount format is shaping business strategies long-term. Companies see that the “value retail” segment is where the growth potential lies in a low-growth economy. We can expect continued expansion of factory outlets, clearance sales, and discount chains as entrepreneurs and big retail groups alike invest to capture the value-conscious market. This competition will likely further improve the offerings available at discount shops, more variety, better supply of popular items, making them even more attractive.

Dismart Potchefstroom

Specializing in factory-direct products, the store aims to provide customers with significant savings on everyday essentials.

Dismart also features a loyalty program, rewarding shoppers with stickers for every R50 spent, which can be redeemed for store credits. With friendly and helpful staff, along with frequent new stock arrivals, the store is set to be a go-to destination for budget-conscious shoppers.

Office: 083-995-1784

Mobile: 083-995-1784

WhatsApp: 083-995-1784

E-Mail: dismartpotchefstroom@gmail.com

Address: 103 Nelson Mandela Dr, Potchefstroom

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