Why Black Friday could be SA retail’s worst best friend

By taking part in Black Friday, retailers are helping cement the trend of putting a damper on shopping over the festive season – but by ignoring it, they stand to lose out on what has already become the biggest sales day on the calendar.

Black Friday is a huge day for the South African retail sector, and it is only getting bigger every year.

From the early days of Takealot introducing the specials in 2011, to it hitting the mainstream through Checkers in 2014, the day has become set on the South African retail calendar, showing massive growth each year.

Across the board, many retailers reported sales increasing on the day by 50%, or even doubling or tripling, and initial indications point to that trend continuing in 2017 as even more consumers head out to find great deals.

More retailers are taking part than ever before, and marketing budgets advertising the day were boosted to get deals out there – while the “Black Friday” buzzword dominates conversation on social media.

But despite the hype and talking up of the huge volume numbers, the longer term effects of Black Friday – especially for physical retailers – may not be as sweet.

Killing Christmas

In the past, the weeks leading up to Christmas have traditionally been the biggest sales period, where consumers paid (full price) for gifts and holidays and general festivity. This is now changing.

Craig Pheiffer, chief investment strategist, Absa Stockbrokers & Portfolio Management said there has been a notable shift in consumer spending habits since Black Friday came to South African shores, where the lucrative festive season has been front-loaded to November, leaving December a bit bare.

This has created a rather ironic retail problem – where Black Friday does not generate extra sales in the run-up to Christmas, but rather simply brings sales forward and encourages people to buy their presents at a discount rather than full price.

“The rising popularity of Black Friday domestically is making a noticeable difference in the shape of spending over year-end and it’s highly likely that many of those festive gifts are going to be purchased this week rather than just before the festive period begins,” he said.

Daniel Isaacs, an analyst at 36One Asset Management echoed this sentiment, saying that this poses a big risk to retailers – that Black Friday sales will come at the expense of Christmas.

“The biggest issue with Black Friday last year was that sales sucked out December sales. Last year people spent their Christmas shopping budget on Black Friday and retailers sat with stock. I do not know how they will address the issue this year,” Isaacs told IOL.

“Consumers are under a lot of pressure and it has not been a good year for retailers. Sentiment is not good and the political uncertainty ahead of the ANC’s elective conference in December,” he said.

In short – a lot is being put into the hype of Black Friday, but it may not deliver the outcomes, definitely not right across the board.

Following US trends

Considering that Black Friday is a US trend, it stands to reason that those who adopt it will also see the same results. The idea of ‘Black Friday killing Christmas’ is not a new one, with analysts from the USA noting this for several years already.

Particularly, the retailers most likely to suffer are those in tractional brick and mortar stores, where overheads are much higher and margins much thinner than the average online shop. Here, retailers struggle on Black Friday to match the discounts and sales that online retailers put up, and their profit margins are much thinner as a result.

Compounding retailers’ problems is the big migration to online shopping, where more US consumers are taking to the web to avoid the country’s notorious shopping stampedes and Black Friday injuries, or simply because it’s more convenient.

In a South African context, Black Friday started as an online thing, with physical retail catching up later. South African online retail is still limited in its reach due to lower broadband penetration.

However, considering the pace at which Black Friday has been adopted locally, global trends sound a strong warning to retailers to not get ahead of themselves.

Read: How you can score from your bank on Black Friday 2017

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Why Black Friday could be SA retail’s worst best friend