Retail News South Africa

Subdued Black Friday sales forecast, but South Africans love a spoil

Against a backdrop of tough economic conditions, with rising inflation and interest rates, there will likely be less non-discretionary spending among South African consumers and therefore a subdued Black Friday shopping season, states RMB's senior retail coverage banker Debbie Law.
Source: Pexels

“Indications are that the South African consumer is under increasing pressure, although we may be through the worst in sentiment.” Consumer confidence came in at -20 in the third quarter this year, and while still lower than January 2021, it was higher than Q2’s -25. The consensus forecast for Q4 is at -18.

Law added that now the world is open for travel again there is pent-up demand for going on holidays for the festive season, particularly domestically.

“Unlike the past two years, consumers now have something else to spend their money on, other than in retail stores. It's not looking like a vintage Black Friday shopping season this year.”

Justifying a festive splurge

But despite a subdued forecast for Black Friday, South Africans always seem ready to take up great offers.

“Despite headwinds over the past two years, consumers surprised us on the upside last year as festive season sales exceeded expectations by matching 2019 levels. It has been another tough year and people always feel like they deserve to spoil themselves during the festive season, thereby justifying a few splurges,” said Law.

So, could retailers be pleasantly surprised this year?

Disposable income is at record levels and household debt to income is the lowest it has been since 2020, which shows that despite the economic environment, consumers still have cash to spend. Although recent private sector credit is increasing, signs show that consumers are starting to make more use of credit to fund purchases - a clear indication of financial pressure starting to creep into the system.

Stock management

“Just like retailers are stocking up to avoid 2023 price increases and also to stock new store openings, people will also be trying to see what they can buy at this year’s prices,” Law said.

If consumers pull back however, retailers could be overstocked and forced to sell at discounts to clear stock levels which will impact margins. Law added that retailers currently have high stock levels - a compensation for supply chain disruptions and inflation fears.

“Against a backdrop of record load shedding this year, which has had a significant impact on retailers with tens of thousands of trading hours being lost, retailers are pushing hard to get shoppers’ attention and make hay while the ‘sun’ shines.”

She added that retailers with strong e-commerce channels were better placed than those retailers which focus on bricks and mortar to capture lost sales opportunities while the lights are out.

Let's do Biz