Money Switching Hands: Taking Advantage of Discounts & Market Opportunities

With just days to go until Black Friday, consumers are eagerly preparing for festive shopping and taking advantage of pre-Black Friday promotions, as retailers worldwide encourage early holiday purchases and create urgency for deals during this peak period of spending and money switching hands. According to research by Capital Connect, South Africa’s wholesale, retail, and fuel sectors are expected to add over R88bn to the economy in November 2024, driven by booming Black Friday sales.

The global adoption of Black Friday has opened up opportunities for businesses, especially smaller online retailers expanding into cross-border markets, which also presents potential avenues for investors.

In South Africa, Black Friday 2023 came with challenges, including Stage 6 load shedding, which significantly impacted the economy. Nevertheless, BankservAfrica recorded R1.39 billion in online transactions during Black Friday, while in-store swipes dropped 21% to R3.1 billion. Despite these hurdles, banks and corporations like Shoprite, Foschini, Woolworths, Pick n Pay, and Boxer benefited from consumer spending, which positively impacted their financial performance.

• Shoprite: Supermarkets RSA, contributing 80.5% of group sales, grew by 14.6% (6.3% like-for-like) in H1 2024. This growth was driven by strong execution, customer momentum, and record Black Friday and festive trade, extending its market share gains for 58 consecutive months.

• Foschini: Q3 FY2024 turnover grew by 5.1% (6.4% in Clothing), with like-for-like growth of 0.7%. December turnover rose 11.8% (like-for-like 6.1%), spurred by strong festive season trade despite a softer Black Friday and ongoing load shedding challenges.

• Woolworths Holdings: The Fashion, Beauty, and Home segment saw turnover grow by 2.2% over 26 weeks, with in-store growth of 1.5% and a 3.8% increase during the final six weeks, attributed to Black Friday and festive trade. Online sales grew 26.9%, supported by a focus on full-price sales and a 0.3% increase in net trading space.

• Pick n Pay and Boxer: While Pick n Pay's sales in early H2 FY2025 recovered to -1.0% (+1.3% like-for-like), Boxer grew by 9.6% (+5.2% like-for-like). Black Friday and the festive season remain critical drivers for both brands. Notably, Pick n Pay announced plans to list Boxer by the end of the year, with the latter's stronger H2 turnover traditionally driven by Black Friday and holiday spending. Boxer is expected to list on 28 November 2024.

Positive Consumer Sentiment

NIQ South Africa's latest retail sector report highlights promising revenue prospects for FMCG and Tech & Durables in 2024, fueled by improved consumer sentiment. Factors such as reduced load shedding, increased SRD (The Social Relief of Distress) grants, lower fuel prices, and moderating inflation have contributed to a brighter retail outlook.

The managing director of NIQ South Africa remarked: “This clears the way for retailers with attractive promotions to benefit from stronger consumer spending over the Black Friday week, particularly for Tech & Durables.” Eskom has further bolstered optimism, announcing the suspension of load shedding since March 2024 and predicting a load-shedding-free period until at least March 2025.

The Role of BNPL (Buy Now Pay Later)

Digital payment and BNPL providers experienced significant growth during Black Friday and Cyber Monday. For example, PayJustNow, a subsidiary of HomeChoice International, reported GMV growth of 107% over the weekend, despite slower sales on Black Friday due to its proximity to payday.

BNPL services provide consumers with flexible, interest-free payment options, helping maintain cash flow and manage financial obligations during the high-spending festive period. PayJustNow's CEO noted: “Using innovative payment options helps consumers avoid financial shocks during the 'Januworry' period. Planning key purchases and avoiding costly interest payments can ease financial strain while still taking advantage of seasonal discounts.”

In the U.S., one of the world's largest economies, Black Friday through to Cyber Monday shopping set records, with BNPL purchases up 43% and larger orders rising 11%, according to Adobe Analytics. The National Retail Federation forecasts holiday spending will grow 2.5%–3.5% this year, reaching $979.5–$989 billion in November and December, up from $955.6 billion last year. With 27 days between Thanksgiving and Christmas, BNPL firm Affirm anticipates consumers will focus on value and flexible payment options like extended terms and unique credit offers. Despite higher costs, nearly 70% of consumers plan to spend the same or more than last year, highlighting strong demand.

Investment, Income and Spending Insights

The combination of discounts and flexible payment options creates opportunities for consumers to save money and invest in income-generating assets. Higher earnings by the companies mentioned above could also result in higher dividend payouts.

However, financial caution is essential. As DebtBusters reports, many South African consumers struggle with unsecured debt, with 82% of those seeking debt counselling in Q2 relying on personal loans, and 53% dependent on payday loans.

Interest rates remain a key factor affecting consumer spending. Higher rates could limit spending as debt servicing costs rise, while lower rates could encourage greater expenditure. The South African Reserve Bank (SARB) is expected to announce its interest rate decision this week, which will likely influence consumer behaviour during the holiday season.

Additionally, government bonds are debt securities issued by governments to raise funds, offering fixed interest. Their prices move inversely to interest rates: rising rates lower bond prices while falling rates increase them. EasyEquities recently revealed that nearly R100 million is invested in government bonds as investors balance their fixed-income portfolios.

Conclusion

Black Friday isn’t just an opportunity to score great deals - it’s also a chance to think like an investor. The combination of seasonal discounts and innovative funding options like Buy Now, Pay Later (BNPL) offers significant opportunities for consumers and investors alike.

By shopping at your favorite stores while also being a shareholder, you can turn your spending into a win-win, benefiting from both the deals and the businesses' growth. However, prudent financial planning is essential to ensure long-term stability, as leveraging these opportunities to build an investment portfolio can safeguard future buying power and mitigate financial strain in tough economic times.