What FARO’s Rise Says About How South Africans Are Shopping in a Flat Retail Market

The fashion industry has rarely been short of product. Its problem is increasingly what happens after that product is made.

Industry estimates suggest that between 80bn and 150bn garments are produced each year, with anywhere from 20bn to 60bn left unsold. Much of that surplus is diverted into secondary channels, discounted heavily, written off or destroyed. For brands, the issue is no longer simply one of sustainability or waste. It is an increasingly material question of inventory discipline, margin protection and brand control.

That is the market in which FARO has found its opening.

The South African retailer operates at the intersection of excess stock, consumer price sensitivity and brand demand. Its model is locally relevant, but the problem it addresses is global. Fashion brands need ways to clear inventory without undermining full price sales or damaging brand equity. Consumers, meanwhile, are under pressure, but still want access to recognisable labels.

FARO’s significance lies in that overlap. In South Africa, it gives price conscious consumers access to branded merchandise. For international brands, it provides a controlled route for excess inventory that might otherwise have to be sold down more aggressively in core markets.

David Torr, FARO’s chief executive, says the current model was shaped by an earlier misstep.

“FARO wasn’t an overnight success; it was born out of a hard pivot and the willingness to accept defeat when our initial social commerce model didn’t land,” he said. “That failure forced us to stop chasing abstract technology and start building a commercial model that reflects the daily reality of our customers.”

The company’s subsequent growth, he added, came from being clearer about where the model worked and where it did not.

South Africa has proved a useful test case. The consumer backdrop remains weak. Household budgets are stretched, discretionary spending is under pressure and shoppers have become more deliberate about where and when they spend.

PwC’s 2025 Voice of the Consumer report found that more than half of South African respondents were struggling to pay their bills, while 54 per cent had adopted cost saving strategies. Reuters reported in 2023 that about 40 per cent of South African consumers were shopping more frequently at discount stores. In fast moving consumer goods, 99 per cent had changed their shopping habits, with 34 per cent buying whichever brand was on promotion.

Broader industry forecasts point in the same direction. McKinsey’s “The State of Fashion 2026” expects consumers to remain cautious and continue trading down across categories.

The rise of offshore ecommerce has intensified the pressure. Research by Reveal and Yazi found that Shein and Temu together accounted for 13.1 per cent of clothing spend in South Africa, with Temu at 6.8 per cent and Shein at 6.3 per cent. Their growth shows how quickly global value platforms have entered the local fashion market, and how much pressure they have put on domestic retailers and manufacturers.

But consumers are not simply withdrawing from the market. They are becoming more selective. They still want branded products, but they are less willing to pay full price for them. That makes off price retail more than a defensive format. In the current cycle, it has become a structural response to changing consumer behaviour.

For brands, the logic is equally clear. Excess product absorbs working capital, increases markdown risk and can weaken pricing discipline when sold too visibly in primary markets. A secondary channel with geographic separation and brand controls gives suppliers an alternative. It allows inventory to move without directly disrupting the core business.

FARO’s brand mix reflects that role. The retailer carries labels including Zara, Levi’s, ASOS, Reebok, Guess, H&M and Jack & Jones. Its sourcing model is built around excess inventory, market fit, geographic separation and lower write off risk for suppliers.

The company’s argument is that off price retail is not only about buying cheap stock and selling it cheaply. Execution depends on allocation, timing, merchandising and price discipline. FARO uses transaction data to guide buying, pricing, assortment planning, store allocation and location decisions.

That matters in a category where product variation is high and demand is uneven. Different stores can behave differently, even within the same market. Product velocity, local preferences and price elasticity all affect margin and sell through. FARO’s system is designed to decide where stock should go, how it should be priced and how stores should be replenished.

“One of our biggest internal shifts has been the move from manual guesswork to an automated merchandising ecosystem,” Torr said. “By building a system on our own transactional data, we aren’t just making faster decisions; we’re making commercially grounded ones.”

The company says that discipline is visible in its numbers. FARO reports same store growth of 40 per cent to 50 per cent, compared with roughly 7 per cent at TJX, the US listed owner of TJ Maxx and Marshalls. The comparison is not perfect, given the difference in scale and maturity, but it illustrates the growth rate FARO is claiming in a far smaller, earlier stage business.

Annualised revenue has risen from $3mn to $15mn, with a 2026 target of $30mn. That would represent a fivefold increase in roughly two years. The company currently operates 19 stores and plans to reach 30 by the end of 2026. It employs more than 500 people.

The unit economics are central to the investment case. FARO reports store EBITDA of 22 per cent, compared with about 11 per cent at TJX. Each store costs about $120,000 to fit out and generates roughly $200,000 in annual net margin, implying that setup costs are recovered about twice over each year.

Gavin Jones, Head Asset Manager, Retail Portfolio at Growthpoint, said: “FARO has successfully traded for more than a year across two of our regional shopping centres, occupying a combined footprint of over 1,000 m². Since opening, FARO has consistently exceeded expectations, delivering robust and growing trading densities, strong customer appeal, and a differentiated retail offering that resonates with its target market.

“The brand has established itself as a category outperformer within the unisex apparel segment in both centres, supported by exceptional store design, merchandising, and execution. Faro effectively addresses a clear market demand for premium fashion brands at accessible price points, creating a compelling value proposition for shoppers while enhancing our overall retail offering.

“We value our partnership with Faro and commend the team for delivering stores that exceed both landlord and customer expectations. Their success reinforces the importance of identifying innovative retailers that complement and strengthen our tenant mix.”

Torr says the company’s expansion has also required restraint. “We’ve had to be incredibly honest about where our value lies,” he said. “We tested stores in low income environments and realised that serving that level of affordability requires a fundamentally different strategy, not just a cheaper version of the same one.”

That lesson has shaped the next phase of growth. FARO says store on store growth is averaging 35 per cent and that it now has a path towards 100 locations.

“With store on store growth averaging 35% and a path toward 100 locations, we’re no longer just testing a thesis; we’re scaling a disciplined, global blueprint,” Torr said.

The company plans to open 100 stores over the next few years. Brazil and Chile are already in its geographic expansion pipeline, while India, Mexico, Turkey, Argentina and Indonesia are under consideration.

For FARO, South Africa is no longer just a difficult consumer market in which to prove resilience. It has become the basis for a wider expansion thesis. The company is betting that the forces supporting its local growth, constrained consumers, surplus inventory and brand demand, are not uniquely South African. They are features of fashion retail globally.

For more information, visit: https://www.faro.co

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Author: Hannah Clement from Pulse Communications on behalf of FARO.

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