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Load shedding to cost retailers R5.4bn on Black Friday

Load shedding poses an efficiency threat for many retailers on Black Friday.

South African retailers are expected to generate around R17.3-billion in additional sales over the Black Friday promotional period, representing around 6.7% growth over the Black Friday period in 2021. The number is forecast to be R5.4-billion lower than it would have been if South Africa was not experiencing so many days of load shedding, which has been at high levels throughout 2022. 

That’s according to new research conducted by the Bureau of Market Research (BMR) on behalf of Capital Connect, a fintech company that offers opportunity capital to South African retailers. 

The research also finds that the motor trade is forecast to generate an additional sales value of R5.9-billion over the busy promotional period, which is R2.9-billion lower than what would have been expected in a year with less load shedding. 

“With a stagnating economy, rampant unemployment, and rising inflation, the Black Friday period this year is about shopping for survival”, says professor Carel van Aardt, research director at the BMR. “With bleak economic prospects, we can expect to see consumers stock up on necessities rather than splashing out on luxuries for themselves or buying early Christmas presents for their loved ones.”

“The hot sellers this year—apart from groceries in bulk—are likely to include gadgets and equipment to help consumers navigate the load shedding crisis. In an environment of poor consumer confidence and weak discretionary income, we can also expect to see consumers trade down from expensive brands and products to white label brands and more affordable substitutes.” 

Load shedding disrupts business-as-usual 

Excessive load shedding this year has compounded South Africa’s long-standing problems of weak growth and rising unemployment. Load shedding has dampened GDP growth and production, as well as putting more people out of jobs. It also disrupts business operations and supply chains and keeps people away from the shops. 

These factors are all likely to lead to a relatively weaker Black Friday, with growth that battles to keep pace with inflation. A silver lining is the amount of demand load shedding is creating for alternative power solutions. Year-over-year, consumer interest in inverters has increased by 56%, generators by 29%, uninterruptible power supplies by 29%, and solar systems by 34%.

The retail sub-sectors that will gain the most additional revenue over the Black Friday period will be general dealers (R7.7-billion); clothing, textile, footwear, and leather retailers (R5.5-billion); and furniture, appliance, and equipment retailers (R1.6-billion). These amounts could have been substantially higher without load shedding, with general dealers alone losing out on R577-million. 

In the motor trade, the bigger winners include accessories (R1.2-billion), fuel (R2.3-billion), used vehicles (R1.5 billion), and new vehicles (R516 million). New and used car sales are forecast to be R1.2-billion less than they could have been in the absence of load shedding, while fuel retailers will be missing out on more than R870 million in potential revenues. 

Following the trend set in recent years, Black Friday promotions are likely to stretch out across most of November into the early days of December. Consumers already start hunting for potential deals as early as October 10. During this period, brick-and-mortar and hybrid retail channels will be responsible for about 81% of sales and online-only channels for about 19%. 

Steven Heilbron, CEO of Capital Connect, says that even in a challenging year, innovative and agile retailers are finding ways to grow and boost sales. They have prepared for Black Friday by improving in-store shopping experiences, saving with bulk buys at discount rates, diversifying their offering, or creating revenue streams such as e-commerce to thrive. 

“The key to accessing these opportunities is affordable and hassle-free opportunity capital, without the red tape,” says Heilbron. “With Capital Connect, retailers apply for business funding from the Connected App, choose their desired loan amount of up to R5-million, select their repayment period – and the funds will be in their bank account within 24 hours or less.”

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