Black Friday around the corner for South Africa – what businesses should keep in mind
Black Friday is often viewed as a sales boost for businesses, and small businesses should be prepared for a shopping frenzy.
This was explained by Merchant Capital ahead of Black Friday, which falls on Friday, 29 November 2024.
The 2024 Online Retail Report by World Wide Worx revealed that 50% of surveyed businesses found Black Friday critical for operations, marking a peak in consumer spending.
E-commerce is rapidly growing in South Africa and is projected to account for over 6% of retail sales by 2025, suggesting an increase in online transactions.
In contrast, businesses relying solely on in-store sales could struggle to keep up.
Merchant Capital also explained that this could be a great opportunity for businesses to boost their profits.
Many customers believe that they will be getting a good bargain on Back Friday, which means that many of them come prepared to spend a lot of money.
“They believe that they will enjoy savings and great deals. Which will often prompt larger spending and additional ‘treats’ for themselves.”
“Neilsen’s Advanced Analytics division performed a study on the FMCG market that showed that November sales increased by 7.2% from the months preceding and by 8.8% from November 2016.”
“The study also showed that in the FMCG market, in particular, participation in Black Friday did not impact their December sales. But it really depends on your vertical. So do your research before opting in.”
Being able to take advantage of the hype around this event could lead to increases in sales, particularly for small businesses who make the most of their marketing.
“If you are smart, can deliver agile marketing messaging and have a tactical social and email marketing campaign behind you, you may well be able to fight the clutter and up your sales in a meaningful way.”
This boost in could also give businesses a chance to get rid of their old stock, Merchant Capital said.
“Small business growth is often the difference between sitting with old stock or shedding your load. Black Friday is a great way to encourage the take-up of old redundant inventory. Making way for the new.”
However, this enthusiasm could also lead to some potential downsides for small businesses that need to carefully manage their cash flow, compete with big businesses and cope with more customers than they may have the capacity for.
As people do their holiday shopping on Black Friday, businesses need to account for their December month may be slower than expected.
“So what was normally a very good Christmas trade can now mean rapidly reduced December turnover. Retailers need to work this new spending habit into their projections and stock flow,” Merchant Capital said.
Small businesses also have to compete for attention with much larger and more established retailers on Black Friday, they explained.
“As a small business, you are up against the big guys. Large retailers with huge marketing campaigns behind them. Certain larger retailers will even offer loss-leaders to draw in customers.”
This strategy involves selling a product at a price that is not profitable but is sold to attract new customers or sell other products.
While this strategy may be worth it for larger corporations, small businesses may not be able to afford these kinds of sale.
“On this day, over any other, customers are price-sensitive. They expect a good deal; otherwise, they will gladly shop elsewhere.”
“Heavy discounts might be the only way to win that sale over your competitor. But this is often a discount that isn’t worth the sale.”
According to Merchant Capital , it is also important for businesses to manage the increase in store traffic, and while larger retailers may be well-equipped to do so, small businesses may struggle.
“Make sure that your store has the capability to restock quickly, check customers out efficiently and plan for adequate security to prevent theft.”
“Consider limiting the number of customers in-store at any given time. Hire additional security and sales assistants to manage visitors.”
“Make sure your store can handle it. Sub-par in-store or online service can have a negative knock-on effect on your brand. So make sure you employ more staff on the day and upgrade your online systems so that they can carry an abnormal load should it arise.”
In general, small businesses struggle with market readiness, which is only amplified on Black Friday.
According to Catherine Wijnberg, the Founder and Director of Fetola, who spoke on the Money Show, market readiness is one of the main reasons that small businesses fail.
“The entrepreneurs or the small businesses are not aware of the fact that their quality is not up to standard,” she said.
“They’re not reliable enough. They’re not professional enough. And, in fact, they’re not ready yet to meet the needs of the market.”
While this is not only limited to Black Friday, the traffic and accelerated business that the event can draw may be too much for some small businesses to handle.
Merchant Capital recommended that small businesses consider what their competitors are doing to help them decide whether participating in Black Friday is a good idea.
“If your competitors are in the space, this may mean it’s good for your vertical. Simply being there may be a good way to claim your space in some way.”
“If you aren’t in the game, you can almost guarantee it will be a bad sales day.”
Instead of being drawn into the excitement of the event, they urged small businesses to carefully consider whether they have capacity for Black Friday.
“The jury is out as to whether this makes sense for all small business growth. But what is very clear is that retailers think long and hard about capacity, strategy, bottom line, and long-term impact.”
“Small business growth is a delicate balance between doing what works and taking advantage of the right opportunities.”
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