CAPE TOWN – While more South Africans participated in the Black Friday shopping event in 2018 compared to the preceding year, the average spend per consumer dropped noticeably.
The decline in per-customer spending was also visible in the US, where the concept of Black Friday originated.
US online sales showed continued popularity with a 24 percent increase in transaction numbers, according to Adobe Analytics.
Furthermore, this year’s Cyber Monday was the single largest shopping day in US history with reports of an estimated $7.9 billion (R113bn) spent – an increase of 19.7 percent from 2017.
Two in three South Africans participated in Black Friday in 2018, an increase from a 54 percent participation rate in 2017.
From an online perspective, BankservAfrica counted more than 400 000 sales transactions – a 55 percent increase compared with 2017.
Similarly, Cyber Monday sales transactions increased by 36 percent in 2018 to 176 595. In parallel, transactions per minute increased considerably on both days, according to Black Friday Global Analysis.
In contrast, electronic funds transfer (EFT) transaction values decreased by 19 percent.
Retail management platform Vend reported that in-store retail spending in South Africa over the 2018 Black Friday shopping period decreased by 10 percent compared to last year, while volumes also saw a decrease of 2 percent.
Nonetheless, spending results were encouraging in certain product segments. Clothes, electronics and shoes were the most bought items.
Small business funder Retail Capital reported the following increases on credit card usage based on product category during the Black Friday weekend:
Missing out on scarcity and urgency in sales promotions
Rather than only concentrating on Black Friday sales, many stores aimed to stimulate spending during the entire month of November – resulting in what is now known as Black November.
Discounts were on offer during the entire month, thereby diminishing the once-off special and never-before-seen appeal of Black Friday.
Consumers tend to react to the idea of scarcity and urgency: When an item is in short supply, we tend to view it as more valuable. In this case, however, South African consumers were becoming familiar with the idea of seeing sales in stores; diminishing the rush and urgency of buying a specific product before the sale concludes.
The familiarity associated with discounting in stores and online meant consumers would not buy a product unless its price dropped even further. Various online stores offer discounts throughout the year, meaning they would have had to run extreme price promotions before experiencing a larger spike in sales.
Priming in favour of responsible shopping
There were also several warnings from consumer groups, financial regulators and news publications in the lead-up to Black Friday to warn against excessive spending and overindulging.
This may very well have primed consumers to spend less and more consciously, tempering excessive spending.
With the lead-up to Christmas holidays and the expenses that go with it, the warnings likely hit home, making it top of mind that consumers should be more cautious when spending money, even in the face of widespread sales.
Implications of Black Friday performance for Christmas sales
StatsSA announced on December 4 that South Africa’s economy had exited the technical recession in the third quarter following a gross domestic product (GDP) growth increase of 2.2 percenty quarter on quarter.
Household final consumption expenditure also increased in the third quarter, rising by 1.6 percent quarter on quarter.
The main contributors were food and non-alcoholic beverages, furnishings, household equipment and maintenance, clothing and alcoholic beverages and tobacco.
However, it remains to be seen whether the recovery in household spending is sustained and will boost Christmas shopping sales.
Alternatively, will festive sales this year see the same mixed outcome as Black Friday?
For now, retailers are faced with a South African consumer that remains under pressure.
Unsurprisingly, business confidence among retailers remained in net negative territory during the fourth quarter of 2018, according to a survey by the Bureau for Economic Research (BER).
According to the FNB/BER Consumer Confidence Index (CCI) released on 28 November, overall consumer sentiment decreased by 15 points between the second and third quarter.
Furthermore, the household financial outlook dropped from 31 in the second quarter to 13 in third quarter.
In parallel, inflation increased in October to 5.1% year-on-year (y-o-y) from 4.9% y-o-y in September, adding further strain to consumers’ purchasing power.
Consumers have felt the pinch from continued petrol price hikes during 2018 leading to a record high price of R17.08/litre in November.
Income levels and access to credit must be considered as primary influencers of sale participation. If Black Friday sales showed a decrease in popularity and spend, Christmas sales are likely to see a similar outcomes unless stores (physical and online) display considerably higher price discounts.
Overall, the signals sent by disappointing Black Friday numbers and other related data suggest a mediocre outlook for Christmas retail sales.
Content supplied by Lullu Krugel, Christie Viljoen, Maura Feddersen and Genevieve Frydman, PwC Strategy& Economists.