Derek Cikes, Commercial Director at payment fintech Payflex, says South Africans have become obsessed with promotions, with 30% of the total volume of FMCG products in South Africa in 2018 sold at a discounted price, up from 27% in 2017.

A recent Nielsen survey shows that South Africans are the third most discount obsessed shoppers in the world. The tougher economy and its strain on consumers has resulted in cutting back on their discretionary spending, impacting on the volume of grocery baskets.

Add to this South Africa’s current credit crisis with 56% of borrowers (both unsecured and other credit) in default, as detailed in the Differential Capital report, and you have the perfect storm for consumers taking full advantage of discounted shopping opportunities such as Black Friday.

Weak economic growth in South Africa has forced consumers to become more cost-conscious across all purchase categories. This heightened attention to price has turned South Africans to search harder and longer for bargains, which in turn fuels the increased demand for discounted deals.

How price sensitivity is driving South Africa’s online retail environment:

1. Transition to online and mobile purchasing

As the millennial internet-savvy generation matures into the dominant segment of the consumer market, so the demand for online sales grows, with the convenience of the online space used as a platform for comparative shopping where discounted pricing plays a pivotal role. Additionally, growth in online sales is further enhanced by the much-improved logistics and customer experience of the pure-play online retailers, such as Superbalist and Takealot.

2. Drivers of increased online spend (through Payflex)

A large selection of online stores contributes to increased online shopping and engagement. Payflex now has nearly 100 merchants who offer goods across most spend categories, including segment leaders like Superbalist (fashion), ePetstore (pets) and Raru (gadgets and games). Fashion is the key attraction, followed closely by gadgets and tech.

3. Shopping activity

Discounted products impact on the length of online retail engagement as seen in the Black Friday spend of last year, which was more spread out than in previous years in response to retailers starting the discounts early in the week before Black Friday, resulting in shopper demand being spread across a few days during the Black Friday week.

4. Discount motivated shopping: SA vs. US

As the ultimate period of discounted shopping, Black Friday offers an interesting case study. The US online market is huge and showed online sale penetration of 16% in 2019, up from the initial 1% in 2000. The average online order value on Black Friday in the US rose 5.9% from 2018, setting a new record for Black Friday at R2433 ($168).

This market is a lot more mature than SA, where online retail was 1.4% of total retail in 2018. Interestingly, the Payflex merchants reported a similar trend, with South Africa lagging a bit behind, indicating price sensitivity and the potential growth to come.

5. Increase in online retail activity 

Online shopping increased, especially during the key discounted period of Black Friday. One of the reasons is that of convenience, rather than fighting it out at the malls with the crowds. Online shopping also offers an expansive choice at the click of the button, with the customer having more control in managing their experience with the added facility to easily return goods as well as the various payment options, making a compelling argument for shopping online.

The South African Black Friday phenomenon of discounted pricing has only been around for 8 years, compared to the US version which started in the mid-1950s. However, despite its nascent state, Black Friday has grown exponentially in South Africa year-on- year from R2.9bn in card transactions on Black Friday 2018 to R6bn in 2019, increasing 106%, according to Bankserv, which records only a portion* of the entire sales figures.

Price sensitivity continues to underscore shopping activity in South Africa as shoppers increasingly take advantage of discounts as evidenced during the Black Friday discount period – an established retail day that will only continue to grow, particularly in the online arena as the South African ecommerce trend matures.

* BankservAfrica does not process interbank card transactions for all of the banks which means that our data shows part of a fuller picture. It is important to note that we do not see any ‘on-us’ transactions which are transactions that take place between accounts from the same bank.

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