Is Black Friday black gold for SA’s retailers?
Black Friday has become a major money-spinner for some SA companies — but there is a downside
An excessive number of lonely hearts has given rise to the world’s largest shopping day — Singles Day, in China, which this year generated $38bn in 24 hours of online sales. An alternative to Valentine’s Day, Singles Day takes place on November 11 (the four digits 11/11 are said to resemble "bare branches", a Chinese term for a bachelor).
It was first held on a university campus in the early 1990s. But Jack Ma, owner of Chinese online retail giant Alibaba, turned it into an online shopping frenzy from 2009 — if you can’t have someone you might as well have something.
Singles Day dwarfs Black Friday in the US, which will take place on November 29 this year and is the day Americans spend one of their very rare public holidays shopping for deals.
But in SA, it’s Black Friday that’s a fast-growing trend (even if SA’s version pales in comparison to global ones). Payments company BankservAfrica reported about R3bn in credit and debit card sales on Black Friday in 2018, up 16% from R2.5bn in 2017.
Takealot, which brought Black Friday to SA in 2012, sold R1m in inventory in its inaugural year. That grew to R17m in 2015, and more than R196m last year. Between 2017 and 2018 the company recorded a 127% increase in the number of transactions recorded. And it’s expecting this year’s event to be even bigger.
While cash-strapped consumers may benefit from the bargains that have become synonymous with Black Friday sales — specifically on electronics, appliances and nappies — retailers have to shell out a fair amount in advance. Additional costs include those related to extra staffing, security and queue management, extended trading hours, relevant IT infrastructure, more demanding stock management and increased deliveries.
For some, the price is worth it.
Matthew Leighton, spokesperson for online retailer OneDayOnly, says: "Sure, hiring contingency staff and ensuring the site can handle increased load does come with a monetary cost, but it’s a very necessary and acceptable cost."
But in some cases, a slump in sales before and after Black Friday needs to be factored in. Last December, for example, retail sales in SA fell 1.4% year on year, while November reflected a 2.9% spike in sales volumes.
Clicks chief commercial officer Rachel Wrigglesworth says Black Friday has completely changed the retail run-up to the festive season.
"Customers plan far in advance of the event and set aside savings to spend during this period," she says. "Google data shows us that customers start searching [for bargains] weeks before the event."
Bed King marketing manager Andries Coetzee says his company has noticed that shoppers stay away in the weeks before Black Friday. "This is tough on the retail business. Retailers need to be innovative and find ways to get shoppers through their doors between now and Black Friday."
For small businesses, Black Friday sales can cost more than they’re worth, warns Merchant Capital CEO Dov Girnun.
"Retail business owners should carefully weigh up the pros and cons before being swept away by the Black Friday wave," he says. "As a small business you’re 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."
But Black Friday is bread and butter for large general merchandisers like Game.
Customer director for Game and DionWired Katherine Madley says the company starts planning in January to ensure sufficient stock and put logistics in place.
In SA, 96 Game stores will open at midnight to serve customers who still have to go to work, as it’s not a public holiday here as in the US.
The retailer will then monitor social media throughout the day. Madley says a video of an incident at one store that goes viral can scare shoppers away from other stores — even if the incident happened at a store in Botswana.
Planning doesn’t stop at stock levels and crowd control. The other threat facing retailers is cybercrime.
Simeon Tassev, MD of IT firm Galix Networking, says the main concern is "denial of service" attacks — where hackers force sites down until a ransom has been paid.
He says sites have to be prepared, as loss of revenue due to a broken website can run to millions in forgone sales.
Consumers are vulnerable to cyberthreats too: because of the urgency of Black Friday sales, consumers may pay less attention when shopping online, and could be sent to fake retail sites in phishing attacks, warns Tassev.
Then there’s the threat of debt. TransUnion credit company compared South Africans’ credit applications in the week around Black Friday last year with a week the month before. It found "a 37% increase in [applications for] new accounts and a 21% increase in total credit limits for new credit cards, clothing and retail revolving accounts".
TransUnion Africa CEO Lee Naik says: "The problem comes after the madness has worn off. Our data found that six months on, just over half of the new retail revolving accounts taken out during Black Friday 2018 were more than one month in arrears."