November spike may be at expense of December retail figures
The occasion itself is merely a “spike” which FNB commercial property economist John Loos says can help shift a greater portion of consumer purchases into November. This spending could be delayed from October or brought forward from December.
Furthermore, people can spend only as much as they have.
“A stagnant economy is causing disposable income growth to be weak, so real retail sales growth should be moderate too over the final months of the year. One day of specials will not make a meaningful difference, except to have some positive seasonal impact on November-specific sales at the expense of October and December.”
Although Black Friday this year will be “a big day of sales”, Loos suspects it may be “a little less big” than last year. “I base this not only on this year’s weak economic data but also on the decline in Q3 consumer confidence.
Weakening consumer confidence can cause households to be a little more cautious with their spending, with concerns for the future of the economy, jobs and their own financial position on the increase.”
Similarly, while December retail is always strong, he would be “surprised” if real retail sales for the month were stronger than last year.
Echoing this, Stephan le Roux, president of the South African Council of Shopping Centres, says South African shoppers are among the most price-conscious in the world.
And although Black Friday has become the “most hyped promotional event” on the retail calendar in the past couple of years, it seems Black Friday and Cyber Monday do not generate additional sales. Rather, sales that would have normally occurred earlier in the year or in December now take place in late November.
“It basically eats into the same consumer spending pie and will
have no direct impact on overall shopping centre performance. Retailers however will try to use the lure of huge discounts to get
shoppers into stores where they will hopefully spend on non-discounted items.”
Also, for property owners and retailers, Black Friday comes with additional operating costs as shopping centres open early and close late, while retailers increase staff to cope with the crowds.
“Spending over the festive season and Black Friday (combined) will not be significantly higher than 2018. It is possible that Black Friday will be much bigger this year than last but then we expect Christmas sales to lag. However, given that most year-end bonuses are paid in December, Christmas sales will still be much higher than Black Friday.”
Le Roux adds: “While I’d expect a growth in retail sales over November/December, this growth will be in line with national retail sales growth over the past year.” Last year, Black Friday transaction volumes grew by 16% compared to 2017, says Thokozani Dlamini, chief executive of FNB Merchant Services.
The total number of transactions processed through the bank’s payment system over the course of the Black Friday weekend was 10 million on
Friday, 8m on Saturday, 5.9m on Sunday and 6m on Cyber Monday.
Historically, both “card present” (CP) and “card not present” transactions, which include both online and app purchases, increased during this period. “While we expect CP transactions will reflect the majority of consumer spend, online and app purchases have shown strong growth in recent years in line with the increase and adoption of e-retailing in South Africa and globally.”
Dlamini adds as a proactive strategy to maximise sales, some retailers are now spreading specials over two or three days before to Black Friday.
Le Roux believes spending on Black Friday will be concentrated in buying of electronics and large domestic appliances among the higher income groups while the lower end of the market will be pursuing discounted groceries.