CONSUMER INSIGHTS | 16 NOVEMBER 2022 Consumers are spending more, but will they buy more this Black Friday? Absa | Corporate and Investment Banking > Insights and Events > Consumers are spending more, but will they buy more this Black Friday? Isana Cordier Sector Head of Consumer Goods and Services at Absa CIB SHARE Black Friday in 2022 might provide a fascinating insight into the state of the South African consumer as individuals begin to re-build their personal balance sheets while weighing up a global environment which is facing unprecedented social and economic upheaval. Over the past 3 years, consumer behaviour has been largely influenced by the COVID-19 lockdowns and the “work-from-home” culture, driving spend on home improvements, online gaming and technology, and the rise of home delivery services. Now as the world begins to return to pre-COVID habits, we are seeing a strong swing toward leisure and travel services …at least up until the point that conflict between Russia and Ukraine was the match which sparked a surge in inflation. This in turn has driven Central Banks to aggressively tighten interest rates in both Developed and Emerging Markets. Our own economic issues with unstable electricity supply and the havoc it causes for many business owners, over and above the rising fuel spend, adds a further concern regarding the finances of South Africans. Albeit, we continue to witness growth in transactional spending from our card data. We recognise that it does not distinguish between debt and available cash, or the impact of inflation on the increased value spent. It also does not show the effect on the cash consumer which is by far the larger part of our economy and most probably the hardest hit. This leads to the obvious question: Just how financially healthy is the South African consumer and what trends are we likely to see influence retailing over the coming year? It would appear that the sharp spike in inflation started to impact average basket sizes, driving higher spending at month ends resulting in a shift in certain consumer behaviours. What the hard data says The BankServ Africa Economic Transactions Index (BETI) highlights how 2022 has been a clear year of two halves. The index - which is released monthly - tracks the total number of banking transactions cleared through BankServ. This index hit an all-time high of 143 in May 2022 but subsequently declined for 4 consecutive months to September 2022. While load-shedding had a negative impact on business activity, rising interest rates began to take hold as consumers were forced to tighten their belts. Credit Bureau TransUnion released its third quarter Consumer Pulse review, pointing out that the unemployment rate had dipped slightly as more people found work and 37% of South Africans surveyed expected their income to rise. However, the welcome dip in unemployment is being off-set by a rising cost of living. What the retailers say Most major retailers and fast-food operators have reported a solid 2022 and have forecasted growth over the festive season. However, there is some divergence in how they are expected to approach Black Friday. With traditional retail being disrupted over the last few years, there appears to be divergent strategies when it comes to retailers. Walmart-owned Massmart has indicated that it is likely to focus on a single day of sales while Woolworths has indicated it will unlock a series of specials building up to Black Friday on the 25th and the more digitally-savvy retailers are expected to extend specials into “Cyber-Monday”. One of the areas identified by smaller niche retailers relates to stock management and fulfilment. While larger retailers have been able to stock up on popular product lines, many of the smaller players have been negatively impacted by strikes at Transnet and at South African port operations. What do we expect from Black Friday? Our view is that retailers are more likely to focus on a “Black November” strategy with sustained discounts over a longer period of time rather than looking for a single day of deep-discounted sales. This Black November we expect consumers to be less opportunistic and to rather follow a more planned approach when buying. Consumers are more likely to do research before spending money and be more deliberate and selective. As seen in 2021, this placed online retailers at an advantaged position in many of the sale categories. Christmas and the new school year are around the corner, so we expect consumers to turn their money towards those kinds of transactions. It will also be a time for consumers to purchase planned items they are looking to upgrade, like a new stove, a fridge or electronic equipment. We expect groceries to remain the biggest category spend throughout the month. In short, we expect fewer impulse purchases, but if there is one thing we have learned it is that we are dealing with an unpredictable consumer and anything is possible. We look forward to unpacking Black Friday 2022 and providing insights into the spending over this period. In the past, Black Friday spending has been seen as a win-win event where consumers can cut costs and retailers can clear stock. All being said this remains; the pressure is mounting on households. and the combination of rising inflation being met with higher interest rates is likely to provide a real hand-brake going into 2023. Isana CordierSector Head of Consumer Goods and Services at Absa CIB https://cib.absa.africa/wp-content/uploads/2020/07/file_example_MP3_700KB.mp3 Related Articles CONSUMER INSIGHTS The evolution of China-Africa lending China has long recognised the investment potential of Africa, deepening its relationship with the Continent over the past two decades. By establishing itself as a crucial partner to Africa on trade, and as a substantial lender and investor, China has supported key projects, from infrastructure, ICT to agriculture. Read more CONSUMER INSIGHTS Cards turn out to be favourites during Black Friday Any spot-check in today’s dailies, billboards or banners on major social media sites will not miss out on adverts with bright-coloured messages that read, “Kenya’s Biggest Black Friday”, “Black Friday Sale Starts Now!”, “Black Friday Never Ends!”, “Everything Up to Half Price”. 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