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    Home » Opinion » Hilton Tarrant » Black Friday discounting shows retail malaise

    Black Friday discounting shows retail malaise

    By Hilton Tarrant25 November 2016
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    hilton-tarrant-180After Checkers pioneered the introduction of Black Friday ­– the US shopping day after Thanksgiving — in South Africa in 2014, we’ve seen other retailers steadily adopt the sales “event”. This year, however, practically every retail chain in the country has hopped on the proverbial bandwagon.

    Seen through the lens of sales falling off a cliff, as they have, it’s not hard to arrive at the conclusion that retailers are completely desperate for sales growth. Statistics South Africa revealed earlier this month that retail sales were up only 0,9% year on year in the third quarter. The textiles, clothing, footwear and leather goods category (with the second largest weighting (about a fifth)), was up only 0,1% in that period. The numbers for this sector are boosted by a 3,8% jump in July (perhaps the effect of the late arrival of winter). Since then, the decline has been accelerating, with a 1,4% drop in August and 1,5% in September.

    The furniture, appliances and equipment category is enduring an even more torrid time, with a third quarter decline of 5,8%. Mr Price Group, in its horror show of an interim results report this month, painted a bleak picture of the South African consumer. They “are feeling the strain” and “diverting spend to essential items”, while “durables and semi-durables are under intense pressure” and the “basket value increase [is] lower than retail selling price inflation and customers [are] shopping less often”.

    It’s not facing these intense headwinds alone. Results from Holdsport, Edcon, TFG, Truworths International and even supposedly “resilient” market-darling Woolworths have (largely) revealed declining so-called “comparable sales”. The only growth has come from inflation and expanding store bases (which have also, mostly, hit a ceiling). Keith McLachlan, of AlphaWealth, detailed on Wednesday just how alarming these warning signs are.

    The Black Friday mania, therefore, should be seen in this context. Even large shopping malls like Menlyn Park (which is opening after a substantial refurbishment and extension), Sandton City, Canal Walk and the V&A Waterfront are getting in on the action (Rosebank Mall has gone so far as to zero-rate parking for the day).

    The theory is, quite obviously, simple: drive sales and footfall by sacrificing margin, and bank on those extra customers shopping more (and, as a bonus, possibly buying items not on sale). You can expect that suppliers, in the grocery space, have been squeezed to provide even larger volume discounts (a trend that has become entrenched in the market in, especially, the past year). For clothing retailers, in particular, heavy discounting in a promotion like this helps move stock that isn’t exactly flying off the shelves — a problem, given the seasonality inherent in the industry.

    Shoprite Group’s Checkers is back, with discounts of up to 50% on products — a similar promotion to last year. Activity last year, even in its stores in “less than prime” positions, was frenetic. Pick n Pay is also promoting “massive Black Friday savings”, albeit with limited pre-promotional activity. Massmart’s Makro, Game and Dion Wired are all in on the action.

    In the clothing space, TFG’s brands including Foschini, Markham, Fabiani, Totalsports and Sportscene have seemingly stolen a march on their bricks-and-mortar rivals. All are heavily promoting Black Friday-related sales. In the online space, Superbalist, Spree and Zando have been teasing today’s big sale all week.

    black-friday-640

    Some, including Game, Makro as well as the country’s largest online retailer, Takealot, are running sales from Friday to Monday (Game actually started on Thursday night!).

    Edcon’s CNA will run promotions on particularly its technology products on Friday, as well JD Group’s (Steinhoff) Incredible Connection and HiFi Corp. Even Dis-Chem and Clicks — and Wimpy (?!) — are running Black Friday deals.

    Peak festive season shopping in the US has begun to be structurally linked to Black Friday, since the retailers really begun pushing the event over the past decade (in recent years, online retailers have introduced Cyber Monday for the Monday following Thanksgiving weekend!). It serves one important purpose in that it stimulates spending and stretches the Christmas shopping period even earlier. The more opportunities there are for consumers to shop, the greater the chance that they will.

    If the activity is this frenzied this year, what will it look like if the wheels really fall off the retail sector in the next 12 months? With shopping mall developments peaking and that market reaching saturation, you can bank on centres increasingly driving (and banking on) this promotion from 2017.

    • Hilton Tarrant works at immedia. This column was originally published on Moneyweb and is used here with permission
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