Retailers cut prices to lure cash-shy Christmas shoppers

Retailers are going all out to cut prices this festive season in a bid to woo cash-strapped consumers into their stores.

Successive rate hikes, fuel price increases and inflation have seriously dented South Africans' spending power as retail sales continue to fall.

Figures released by Statistics SA last week showed that sales fell for a sixth consecutive month in October. While the fall was not as sharp as some had expected, it reinforced the dismal outlook for the economy's third-biggest sector, which is now in a recession.

Although the price of petrol has come down of late, this is not expected to filter through to back pockets for some time and retailers are trying to outdo each other with pricing.

In addition, the 50-basis- point rate cut on Thursday by the monetary policy committee is not expected to boost spending as consumers would only see the effect when bond payments went off, says ETM economist George Glynos.

Outlets such as Game are having pre-Christmas sales. Game's advertising material calls it “funbeatable savings” and promises “the lowest prices this Christmas”.

Killer deals

Brian Leroni, group corporate affairs executive of Game's parent company Massmart, says consumers are very value- conscious.

They are “cherry-picking killer deals within merchandise categories”. Competitively priced bundled power tool offers are selling well, for example. The company has also seen buying down within brands and moving away from well-known fast-moving consumer brands towards no-name brand equivalents.

Massmart has also seen more purchases of beauty care products, which seems to suggest a move away from salons.

Placecol marketing manager Esti Klopper says the group aims to increase revenue through its gift card programme as well through value-for-money offers on its anti-ageing range. It also hopes to attract new customers through limited edition gift packs that are only available over this period.

Leroni says deals that are seen to offer exceptional value are flying off the shelves. A recent Builders Warehouse promotion on a Makita three- drawer cordless drill Kit at R1599 — a R600 discount — led to a tenfold increase in sales. The company is also making sure its deals are well known through weekly product and price TV and print advertising.

David Kneale, CEO of the New Clicks group, says its pharmacies are driving volumes as consumers still required medication, toiletries and beauty products.

“Across the three retail businesses New Clicks has strong Christmas promotional programmes to attract customers.” He says the loyalty programmes are also ensuring that consumers return to the stores to redeem vouchers.

The right offering is key

Kneale says customers are being more discerning, so the right product offering is key. However, as schools closed later this year, key trading will start later and retailers could expect a “last-minute Christmas”.

Clothing retailer Woolworths, which has been advertising everything from iPods to mini-tools, says it has “worked hard to put even greater value within customers' reach”.

Retail MD Andrew Jennings says the group has sharpened prices “considerably” and is also having regular promotions.

For example, says Jennings, the average price of clothing has moved down over the past financial year.

“We've worked hard to include a range of quality product for all customer needs this Christmas — from a basic T shirt to that little black dress — all at exceptional value.”

For the festive season, the group has enhanced its value offerings and is offering medium-sized turkeys for R99,95.

Innovation

The group has also focused on innovation.

Echoing the price and value message is Pick n Pay CEO Nick Badminton. The company's festive season trade really kicks in during the two weeks before Christmas, and the group is still confident of a “reasonably good” period as South Africans are likely to stay at home.

Because consumers are more discerning, the group is “making absolutely sure that we present the best possible range at great value for money”.

Badminton says consumers are looking for specials and the group aims to source the lowest possible prices in both food and non-food items.

“We are widely advertising all our specials both in-store and through the media.”

Some groups have not changed their strategy of offering the best value they can at all times.

Lewis Group CEO Alan Smart says the group had not done anything “special special” for Christmas. It has already tightened up for this financial year, he says. About 20% of the group's annual turnover is earned over the festive period.

JD Group chairman David Sussman says the company has gone into this festive season as aggressively as it could, the same approach it followed last year. Foschini CEO Doug Murray says the group is aiming to continue to do what it did every day, offer fashion and quality at a good price to ensure value for customers.

Source: Business Day

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