Cash-strapped consumers, increased competition and fewer new shopping malls in which to expand means business is tough for retailers, which need to make the most of the stores they already have by winning over more customers with lower prices. "This period is one of the toughest ever for retailers from an operations point of view. Previously it was easy for them to roll out space, and analysts have consistently been surprised by a 5% space increase per year," said Rhynhardt Roodt, Investec Asset Management portfolio manager.story_article_left1"That's an astounding number, and the strength of the old model was mopping up market share from the informal market. Retailers can grow revenue through volumes, prices or space - it all filters to the bottom line. Volume growth has been negative for some time, but space growth has compensated and pricing growth has been robust," he said.This week, Shoprite produced annual results in line with expectations, taking yet more market share from the likes of Pick n Pay and managing to protect its margins. Shoprite opened 170 stores throughout the continent in the past year and saw sales increase 11.2%.But Massmart's shareholders were unimpressed with the group's trading update, sending the stock down an initial 13% after it announced that headline earnings per share for the past year would be between 20% and 30% lower. This had more to do with the weak rand than weak delivery on strategy. But even excluding foreign exchange movements, Massmart's headline earnings appear flat - a disappointing result for shareholders. The retailer releases its results later this week.Although some retailers are keeping their heads above water, the retail sector is weaker than it appears.Retail sales in June rose 3.5% year on year, according to data released by Stats SA this week. However, factoring in the revised base from June 2014, actual sales growth was a meagre 0.9%.The base was revised after retail sales contracted sharply in June last year.story_article_right2The weak growth reflects consumers' indebtedness and the severe pressure the economy is under. Additional interest rate hikes would imperil trading conditions further.Given the weak economy, it is difficult to see volume growth increasing in the next few years, and as South Africa is saturated with shopping malls - and given the difficulty retailers have in securing sites elsewhere in Africa - it is likely that food retailers will focus on the space they have.Store design is changing and pricing is becoming more competitive. Retailers are having to rethink pricing and offer prices that cater for all consumers."They're widening portfolios but also including value-added services like financial services," said Christy Tawii, senior research analyst at Euromonitor International.Grocery retailers are now offering apparel, small appliances, homeware and pharmaceutical products. At the other end, Massmart's Game has increased its trading density by selling food.General retailers are battling for a greater share of the consumer wallet.South Africa's mall culture - where food retailers have faced little foreign competition and the usual suspects anchor each mall - means that if a retailer can stock a greater variety of goods it can snatch a greater share of the consumer's wallet and fend off competition.However, "Massmart is still associated with playing in the non-essential product category, like DIY goods. Most consumers still don't associate it with grocery retail. They have a good strategy, but we can't overlook the consumer environment," Tawii said.story_article_left3Woolworths has revised its pricing strategy to bring prices of items such as tinned beans and washing powder in line with other retailers'."At the upper end, consumers have been stronger, but if interest rates were to increase by three percentage points - which is not our base case ... I remember Woolies's food sales fell off a cliff during the last hiking cycle," said Roodt."They admitted they had overpriced then, so we'll have to see what happens this time."He said retailers would have to sweat trading densities."Whether the business models will be successful, time will tell. It's going to be tougher in the food market. The resilience of the upper LSMs is having an impact on market share statistics, but that may change."Shoprite's African strategy is a great lure for foreign investors, but at a 16% contribution to the group, Roodt said, the figure should be more material, given all the years Shoprite has been active on the continent...