MEDIA RELEASE
16 NOVEMBER 2021
Black Friday 2021: Retailers ready but are SA consumers?
- Consumer spending still to regain 2019 levels
- Retailers managing supply chain challenges well
- Signs of shift from discretionary to non-discretionary spending
Black Friday (BF) has become one of the busiest shopping days in South Africa, but the big question is what BF2021 will look like as the economy struggles to bounce back after severe lockdown disruptions.
Debbie Law, Retail Sector Head at RMB said: “All indications are that consumer spending this year is still not what it was prior to COVID-19.”
The FNB/BER Consumer Confidence Index for South Africa rose to -10 for Q3’21 (vs -13 Q2’21) but is still slightly below the pre-COVID-19 levels of -7 (Q4’19). The Q3’21 consumer confidence index will include the impact of the civil unrest experienced in July this year which is likely to have dampening effect.
The index varies on a scale of -100 to 100. A value of -100 indicates extreme lack of confidence, 0 neutrality and 100 extreme confidence.
She noted however that this time last year, many retailers were facing supply chain challenges and stock levels were also a challenge. “This year retailers seem to be much better prepared and, despite continued supply chain disruptions, stock levels are higher than last year.”
According to Stats SA, the change in retailers’ inventory levels for mid-2020 (from 2020Q2 to 2020Q3) showed a more than R200bn drop in inventory levels as retailers let stocks run down because of uncertain expected demand and lockdown measures which resulted in suppliers not being able to secure sufficient stock.
But the data for 2021 Q1 and Q2 shows far less volatility: June 2021 (2021Q2) data only shows a drop of R21.7bn suggesting a significant recovery in the stability of inventory levels.
She said that analysts will be closely watching how consumers spend on this year’s Black Friday as an indication of just how willing and able consumers are to part from their income.
“The past 18 months have been transformative for consumers,” Law noted. “For most of 2020, WFH meant that people weren’t traveling as much and saved on transport costs. The significant drop in interest rates during 2020 helped boost disposable income and put more money back in household pockets. There were a number of social grants made available to help support households and maintain spending behaviours.
“Additionally, the nature of lockdown which restricted consumer movement meant that spend on entertainment and out-of-town holidays was significantly reduced and household spend was directed into alternate retail purchases,” said Law.
She noted however that now that South Africa is 19 months into lockdown and many of the ‘extra’ household funds have either been absorbed into adjusted household spend or have come to an end like some of the grants. And as people return back to work, room has to be made for transport and other travel costs again.
Despite many people being re-employed again, the country is still suffering from significant net loss of jobs from lockdown restrictions which have been further exacerbated by the recent KZN riots and related job losses.
“All of this is placing pressure on consumers' disposable income and willingness to spend. Consumer spend, according to the South Africa Reserve Bank (SARB) for 2021Q2 is below 2019Q2 and indications are that 2021Q3’s spend numbers are also soft.
“Consumers’ enthusiasm to part with their money is still dampened and this may carry through into the festive season spend for this year. The personal savings rate has decreased from 0.7% (Q2’21) to 0.3% in Q3’21 and we have noticed lower spend on discretionary items and a higher non-discretionary spending. This drop in savings along with the pick-up in non-discretionary spend could suggest that there is less household money to around and hence consumers are dipping into funds previously allocated to savings, to keep heads above water,” Law concluded.
End
Contact:
Kate Kelly l kate.kelly@rmb.co.za l 079 637 4663