Was it a Merry Christmas for SA retail?
According to Wonga’s Summer Spending Survey for 2023, South Africans were expected to spend 4% less during last year’s festive season compared to 2022, even trimming their budgets for food and beverages over the holidays. Let’s look at the information we have so far to get an idea of how the South African retail sector performed.
A bleak Black Friday
Unsurprisingly, numbers for Black Friday reflected the financial stress South African consumers are under, with BankservAfrica recording a year-on-year decline in volume of more than 6% for the season, and a drop of more than 21% in value.
Going against previous Black Friday trends, South African consumers mostly bought everyday items instead of luxuries, a trend that was confirmed by data released by Capitec indicating that supermarket chains dominated consumer spending over the Black Friday weekend.
This year’s bargain hunters carefully shopped around while spending less, using virtual stores to price check and preferring to buy big-ticket items online. However, although online shopping is rapidly growing in popularity among its clients, Capitec states that it still represented less than 10% of the total spending value over Black Friday.
South Africa’s Black Friday event was in line with global performance which, according to Reuters, is no longer “the good, old-fashioned kick-the-doors-down" shopping event of yesteryear. Some analysts believe that launching Black Friday discounts three weeks in advance has made Black Friday lose its allure.
South Africa’s hampered logistics also played a role: with constrained imports coming through our ports, retailers were concerned they may not have enough stock for the Christmas season, so avoided discounting as much as they would under normal circumstances.
How festive was the festive season?
Although 2023 was a tough year globally, US and UK shoppers spent more than expected over the holiday period - however, sales were driven largely by deep discounting and buy-now-pay-later (BNPL) offers. In the US, holiday sales rose 3.8% year-on-year, reflecting a reversion to pre-pandemic levels. Shoppers were more careful about how much they spent, however, with discount clothing and book retailers reporting holiday spending increases well above this.
In the UK, online shopping increased 3.7 percent, but prices were discounted 11 percent on average, and the use of BNPL services increased 12.7 percent. We expect BNPL services to become increasingly popular particularly in South Africa, where many consumers are in financial distress, even beyond their international counterparts. According to GfK Consumer Life Global Research, almost three quarters (72%) of South African consumers have spent less on necessities due to rising prices in 2023, compared to 57% of global consumers. Interestingly, the research shows that 57% of South African consumers postponed a purchase until the product was on sale or there was a special offer - which ties into the trend seen over the Black Friday period.
However, it’s not all doom and gloom for our retail sector. While we don’t yet have actual figures, the latest Bureau of Economic Research (BER) Retail survey showed that retailers in the semi-durable goods sector - which includes clothing, footwear and toys - saw positive volume growth over the Christmas period, achieving higher sales volumes compared to 2022.
Unfortunately, sales volumes in both the non-durable goods retail sector - groceries, beverages and cosmetics among others - and durable goods (furniture and hardware) were significantly lower compared to the 2022 holiday season. Analysts attributed the softer sales performance to various factors such as the peak interest rate environment, unexpected investments into alternative power because of load shedding, and fewer 13th cheques due to a non-growth economy.
Next week, we will explore the trends that emerged during the holiday shopping season, and how retailers can tap into these trends to their advantage.