#BlackFriday won't provide the lift SA economy needs - analyst

Johannesburg – With all the challenges facing the South African economy, including job losses, it is unlikely that Black Friday sales will make a significant contribution to growth, according to an analyst.

Speaking to Fin24 by phone on Tuesday, Argon Asset Management’s economic strategist Thabi Leoka shared expectations for this year’s sales event.

“Retail sales is not the driver of economic growth,” said Leoka. She went on to explain that if retail sales do pick up then that would be a sign that the economy is recovering.

Leoka said that locally, the frenzy will not be as big as that experienced in the US. “Given what is going on in the economy, we do not expect it to be well received or as big as it was in the previous year.”

FNB senior economic analyst Jason Muscat explained that Black Friday has only been embraced by South African retailers for the past three years, out of necessity to drive sales in a “lacklustre” consumer economy.

Muscat expects Black Friday, as well as Cyber Monday to contribute to retail sales for the quarter. Over the past three years, November retail sales have jumped at an average 8.4% month-on-month rate, compared to an average of 3.6% in the three years leading up to November 2011. This shows Black Friday has had a significant impact on sales, he explained.

“The problem, however, is that many people use the sale day to buy Christmas goods, which detracts from some of the typical December buying period,” said Muscat. This distorts quarter on quarter numbers as was seen this year where the first quarter’s retail sales contracted 5.9%.

This year’s sales are likely to be helped by lower inflation and the interest rate cut by 25basis points introduced in July, said Muscat.

“There is significant pent up demand in the economy with people having deferred purchases, particularly of durables, during the economic downturn.

“We expect there to be some deep discounts from retailers who are willing to give up a little margin in order to drive top line and market share.”

Even though there will be considerable discounts, retailers can still be profitable, he explained.

“Retailers may well choose to have a few items which are loss leaders just to get people in the store, and make up the margin on other products with more modest discounts.”

Black Friday will also enable retailers to move older stock, mainly technology items.

Online retailers to gain

Muscat is also of the view that online retailers could gain the most out of the event, as they do not have to carry the same overheads as bricks and mortar stores.

They also have well developed supply chains and delivery services which give them leeway to introduce deeper discounts, he added.

EY’s Derek Engelbrecht, consumer products and retail sector leader, expects that online sales would grow well against the previous year, but will only make a small contribution to overall sales.

Engelbrecht also expects that the poor consumer confidence levels and pressure consumers are facing will reflect in the overall sales.

As for items which may do well, Engelbrecht explained that in the past consumers would go for electronics and durable goods, but now even food and general dealers could cash in.

Leoka expects clothing items to sell well. “Coming up to Christmas and the start of Christmas shopping, consumers could take advantage of marked-down prices. 


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