“What you will find is that you have a consumer that is under pressure. A consumer that is making trade-offs, a consumer that is thinking about the price of the goods that they’re going to spend on,” Rodger George, consumer business industry leader at professional services firm, Deloitte, told CNBCafrica.com in an exclusive interview.
This follows after Deloitte released their 16th holiday survey in December this year, across 18 countries from Western and Eastern Europe and South Africa, to compare festive shopping trends for 2013 to last year’s data.
SOUTH AFRICA'S CHALLENGING ECONOMY
George explained that South African consumers, particularly in Gauteng, would be cash strapped due to increasing electricity and petrol costs as well as the implementation of urban e-tolling across Gauteng.
According to FNB/RMB’s index, consumer confidence levels in the country’s economy are also at a decade low.
All these factors have put pressure on the consumers’ disposable income, resulting in a more price conscious shopper when it comes to gift, food and entertainment spend during the festive season.
On the other hand however, George stated that the bad economic situation will not deter consumers from festive shopping activities and that gifts will be purchased in high volumes but at less of a value.
QUANTITY RATHER THAN QUALITY
“They [consumers] are definitely going to spend but they will spend in a more thoughtful and purposeful way. In previous years, people would buy fewer gifts but more in value. This year, they are going to buy less in value and more in volume so the average number of gifts is going to go up,” he explained.
According to the survey, South African spending will increase 4.75 per cent year on year. Consumers’ plans are to maintain their social lives this festive season, with 58 per cent of the budget allocated to foods and gifts, while allocating 20 per cent towards socialising.
Unlike 2012 where cash topped the gift wish list, South Africans this year are opting for the more practical and affordable choice of chocolates, which is followed by money, clothes, books and vouchers.
On the other hand, George emphasised that price comparisons will be a major trend this year as consumers use the internet and newspapers to check product prices before walking into a store.
CONSUMERS DO THIER HOMEWORK
“We also find that consumers will be doing their homework before they walk into stores. If they have internet access, they will be using the internet to compare prices. They’ll be browsing through the daily [newspapers], looking at the prices so you’re going to have a much more price conscious consumer,” added George.
As a result, bargain hunting and loyalty programmes will play a major role in this year’s festive shopping.
“People are going to be looking for bargains and doing their homework, with a very price conscious mind set. They’re going to be looking for value,” he explained.
The loyalty programmes over the years have been increasing in momentum, the majority of people that have loyalty programmes are going to be using them while they shop, they also want to be rewarded for their spend so loyalty programmes is definitely going to be influencing the way they think and the way they approach a business.”
With discounts, sales and loyalty programmes, increasing competition among retailers in the country, George believes that South Africa may be well on their way to introducing “Black Friday” to the local market.
A SOUTH AFRICAN 'BLACK FRIDAY'?
Black Friday, the Friday before Thanksgiving Day in the United States when retailers offer promotional sales to kick off the holiday shopping season.
“Traditionally, retailers in South Africa have always discounted goods after Christmas whereas Black Friday discounts before. I do think in years to come it will play a bigger role but if you walk into any of the stores, there’s a lot of discounting going on right now, it’s probably not as formalised as the Black Friday but I do think that as competition increases in South Africa, Black Friday will at some point kick in in a big way,” he said.
Another international trend which has caught on worldwide is online shopping however its reach in South Africa has been poor. George believes that this is due to issues of slow internet connection in the country, security risks of fraud as well as the majority of consumers’ preference to go to retail outlets for that ‘festive shopping vibe’.
ONLINE SHOPPING NOT TRENDING
“Over 50 per cent of internet users in South Africa will at some point use the internet to assist in their shopping, whether its price searching, product information or for transacting. The people that are actually going to buy on the internet are much less,” he added.
This may cause local consumers to lose out on variety of product. George explained that retail outlets are only able to hold a certain number of products in store whereas on the internet, a wide variety can be offered.
“When you walk into a retail store, what’s on the shelf is what’s available but if you had access to the internet, you would have more of a variety to choose from because a store can only hold a certain number of products,” he said.
Despite this, George still believes that South Africa’s retail market is a force to be reckoned with.
“I think South African retail is still a force to be reckoned with for the next couple of years anyway.”