Bleak Christmas for retailers
Economists expect underspending this season as hard-hit consumers preserve meagre savings
SOUTH Africans will curtail their spending habits this festive season, and brace themselves for the bills that await them in the coming year.
According to Pricewaterhouse Coopers (PwC) strategists and economists, Lullu Krugel, Christie Viljoen, Maura Feddersen and Genevieve Frydman, retailers remained under pressure despite the economy exiting the technical recession in the third quarter.
They said records of reduced Black Friday sales and other related data suggested a mediocre outlook for Christmas retail sales.
“Several warnings from consumer groups, financial regulators and news publications in the lead-up to Black Friday – against excessive spending, may very well have primed consumers to spend less. With the lead-up to Christmas holidays and the expenses that go with it, the warnings likely hit home,” the PwC four said.
“South Africa’s economy exited the technical recession in the third quarter.
“However, it remains to be seen whether the recovery in household spending is sustained and will boost Christmas shopping sales.”
The managing director of market research company Nielsen Africa, Bryan Sun, who assisted in the undertaking of a global consumer confidence survey, agreed with the PwC team, said consumers faced a number of economic challenges in 2018.
“Challenges during 2018 included increasing unemployment, a 1% VAT increase and petrol price hikes.
“[This] may explain South Africans’ willingness to adopt a ‘wait and watch’ approach, and the resulting lack of movement in the country’s latest consumer confidence index figures,” said Sun.
He said only 19% of South Africans indicated they had surplus capital after paying expenses, reflecting a strong uptake in financial planning.
Forty-one percent of South Africans had indicated they would save their surplus capital.
Sun said it showed that securing finances remained a top priority.
However, the chief executive of Debt Rescue, Neil Roets said he believed despite the economic pressures, frivolous spending during the December period was still on the cards, as people made “emotional purchases”.
“During Black Friday, there was much more spending than in previous years, indicative of the fact that we will see more spending over the festive season.
“It’s a form of emotional spending; people feel they must spend to relax and spoil their family. It’s the reality,” said Roets.
However, money was in short supply among consumers.
“This year, we’ve seen lots of petrol price increases, interest rates going up.
“Technically speaking we’re out of a technical recession, but not in a position where people can relax and spend money now.”
Chief economist of Efficient Group, Dawie Roodt agreed with Roets, and said people would undoubtedly spend money they did not have and enter the credit zone this December.
However, he said retail stores would be under pressure as people spent less on non-essentials.
“People will probably spend more on necessities, so instead of buying kids a toy, they will rather buy shoes.
“The general trend is that there is varied pressure on spending.
“A number of retailers will report underspending,” he said.
Roodt said more people moved to internet shopping, which would hit traditional retailers further.