Black Friday taking consumers from bricks to bytes

Isana Cordier, Sector Head: Consumer Goods and Services

Highly regarded marketing and investment commentator Professor Scott Galloway of Stern University recently shared a fascinating statistic: More US households own an Amazon Prime Membership than decorate a Christmas Tree, own a pet or go to Church in 2020.

This statistic speaks to the changing consumer landscape across the globe and the role that digital platforms now play in the retail space.

While South Africa does lag some of its first-world peers in terms of digital consumption, “Black Friday” – and by extension “Cyber Monday” – trading statistics presented some insights into the impact of the COVID-19 pandemic and what it might mean for retailers going forward.

In the past, Black Friday has very much been viewed as an opportunity for retailers to do physical activations and sell “big-ticket” items such as electronics and home appliances through in-store activations. “Cyber Monday” was then an opportunity for the online retail operations to kick into gear.

For obvious reasons, 2020 has not been a normal year and retailers didn’t see queues outside their physical stores and many of the deep discounts that we have seen in the past have not materialised. 

While some of this can be attributed to economic pressures, we need to remember that many retailers did not have a normal stock year – it takes up to 6 months to prepare for Black Friday, and many retailers didn’t have Easter specials or the ability to plan their stock levels due to the lockdowns that were implemented across the globe.

With the Festive season upon us, it is worth unpacking some of the data to better understand exactly how consumers reacted this year.

The first stand-out data point is that the “Real Black Friday” actually took place in March 2020 just prior to the Level 5 lockdown coming into effect. Over R1.2bn in transactions took place on the day before the lockdown came into effect and the three days prior to lockdown were 3 of the 4 highest days in terms of transaction volumes.

However, only certain categories benefitted as consumers were stocking up on alcohol, groceries and fitness equipment leading to a spike in consumer activity across the country.

With the lockdowns starting to bite, unemployment spiked in the third quarter of 2020 with the unemployment rate coming in at 30.8% – the highest unemployment rate on record since the Quarterly Labour Force Survey (QLFS) began in 2008.

This was reflected in the data we saw as the traditional Black Friday rolled around.

According to data out of BankServAfrica, in-store card purchases on 27 November numbered just under five million, a decrease of 30% compared to 2019. Online transactions, by contrast, spiked by more than 60% to just under 870,000 sales in total. This represented an increase of 300 000 extra online sales.

There were two million fewer sales in physical stores according to the BankServ data.

Looking specifically at Absa data, we can see the following:

• Black Friday spend in 2020 decreased by 22.4%, with just over 2 million Absa Card customers swiping or clicking on the day. The total turnover for the day on Absa Card customers was approximately R2.7bn and 5.2 million transactions took place.
• Total turnover for Absa acquiring data was roughly around R6.9bn over the Black Friday weekend.
• The total Card Issuing spend for the Black Friday weekend was 22.4% down last year, whilst Payment Acceptance showed a 31% decrease which correlates somewhat with Bankserv statistics.
• There were 86 transactions approved every second down by +- 23 transactions, valued at R47k/second also down with +- R21k/second from the previous year

What are some of the key insights that retailers can use in their decision-making process:

1. There was a shift from credit to debit card in 2020: While this statistic needs to be investigated further, it may suggest that many consumers are reaching their credit limits and this may have a material impact on the December spending habits.
   
   Our data showed that credit card transactions declined for both credit card “present” and “card not present” transactions.
   
   Online spend for debit card transactions had risen 29% over the period.   
   
   
2. Consumer confidence is coming back: Data out of the Stellenbosch-based Bureau of Economic Research (BER) reported a spike in consumer and wholesaler confidence, following a sharp increase in consumer spend in the third quarter.
3. …. But consumers are feeling the pinch: Considering that many retailers choose to run a longer sale program throughout the month of November, it is also noticeable that the whole month of November 2020 is comparatively down 2.7% compared to November 2019.  This is striking against the previous month of October where traded value was up 17%. Most categories reduced in value processed, except the Building and Home Improvement categories.  Even the biggest traders in Food and Groceries category show reduced trading through the month of November.
   
   It remains to be seen whether the termination of the UIF and TERS benefits plays a material role in consumer confidence in December.

• Consumers are changing what they buy: The December sales update out of Italtile showed the work-from-home trend was driving a clear shift toward greater investment in the home, aided by restrictions on travel and other recreational activities.

• Consumers are changing how they pay: Despite some challenges with online channels it’s clear to see that customers are embracing new payment channels like Tap and Go and online more than doubling from 8% in 2019 to 22% in 2020.New payment types like Samsung Pay / Garmin Pay / Apple Pay / Fitbit Pay and others can also be seen to be used to pay for goods such from groceries, fuel to something to eat on the go.
  
  

Financial results coming out of the retail groups suggest that those who made the shift toward digital channels have reaped benefits.

Reporting interim results in November, The Foschini Group (TFG) saw online sales now make up 14.4% of total turnover. Online turnover in TFG Africa and TFG Australia saw strong growth of 115,8% (In Rand terms) in TFG Africa and 66,8% (In Australian Dollars) in TFG Australia for the six months ended 30 September 2020.

Woolworths similarly reported a pleasing shift toward digital channels when reporting its sales for the 20 weeks ended 15 November 2020. The group provides an interesting marker for the health of the consumer due to its diversified geographic footprint and product ranges.

While talk of COVID-19 vaccines arriving in early 2021 have boosted market confidence, digital channels are expected to play bigger roles in the consumer and retail space – it just remains to be seen whether the economy has enough momentum to sustain this consumer rebound.