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Banking on escalation of shopping craze

Business Report logo Business Report 2019-11-28 Dineo Faku

a group of people holding signs: IMAGE DISTRIBUTED FOR WALMART - Customer leaves Walmart happy after purchasing an onn. TV at the retailer's Black Friday store event, on Thursday Nov. 28, in Bentonville, Ark. (Gunnar Rathbun/AP Images for Walmart) © Provided by Independent Media IMAGE DISTRIBUTED FOR WALMART - Customer leaves Walmart happy after purchasing an onn. TV at the retailer's Black Friday store event, on Thursday Nov. 28, in Bentonville, Ark. (Gunnar Rathbun/AP Images for Walmart) JOHANNESBURG - The Black Friday craze, which first engulfed South Africa five years ago, is expected to be even bigger this year, as customers have become savvier and retailers have gone all out to entice consumers to spend their hard-earned money.

Black Friday is an American shopping marketing gimmick that takes place a day after Thanksgiving and has become an important date in South Africa’s retail calendar.

In conjunction with Cyber Monday, which also originated in the US, Black Friday has become a revenue driver for local retailers and has helped cash-strapped consumers take advantage of massive discounts.

South African shoppers spent R3billion on Black Friday in 2018 and experts are expecting nothing less this year.

Yesterday research by short-term lender Wonga revealed that South Africans would each incur an average of R6585 in festive expenses this summer, over and above their usual budgeted expenses.

“Based on Statistics SA’s mid-year population size estimates, working-aged South Africans are set to pump R254billion into the economy, an increase of 24 percent from last year," it said.

Global auditing firm PricewaterhouseCoopers (PwC) said in a survey report that South African shoppers would probably spend 36percent more this year compared to 2018.

Shoppers are expected to spend an average of R3812.4 on Black Friday and Cyber Monday in 2019, compared to the average of R2803 during the Black Friday and Cyber Monday sales that took place in 2018.

“The positive outlook suggests that customers are remaining optimistic, following the significant disappointment of the discounts that were offered in 2018,” the PwC said in the report.

Martin Grunewald, the executive head of Payments Business at BankservAfrica, said there were 5.2 million in-store card transactions during Black Friday last year.

“We expect nothing less in 2019, as Black Friday sales have been growing year-on-year,” he said.

Grunewald said the majority of transactions last year were done at grocery stores and warehouse stores, as South Africans stocked up on household consumables at discounted prices rather than luxury big-ticket items.

“Given the tough economic climate, we expect this year to be similar,” he said.

Retailers use Black Friday to maximise their profits, with The Foschini Group saying earlier this month that the second half of its financial year was heavily dependent on Black Friday, Cyber Monday and the Christmas trade, which would largely determine the group's performance for the full year.

Shoprite, Checkers and Checkers Hyper said they would extend their trading hours to cater for the spike in demand on Black Friday.

Lulama Qongqo, an investment analyst at Cape Town-based Mergence Investment Managers, said retailers did not have a choice but to participate in the Black Friday craze.

She said that while retailers were doing the best they could to give good discounts, the discounts were nowhere near those that are offered in the US on that occasion.

“The retailers are trying to give customers the best discounts they can without impacting their margins too negatively. But this is not comparable to the Black Friday that we see in the US.

"Our discounts have a long way to go before we get there. However, the cost of living in South Africa is much lower than in the US. On a dollar-to-dollar basis, our products are much cheaper, and to expect discounts to be similar to the US is unrealistic."

Qongqo said consumers were becoming more savvy with their money and were holding off making purchases on big-ticket items, including furniture and electronic goods.

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