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E-commerce sites use electronics as bait for Black Friday

Read time 4min 10sec

With discount deals of up to 40% off, local online shopping platforms are prepared to make a loss on Black Friday, tolure in potential long-term shoppers.

As retailers like Shoprite, Pick n Pay, Makro, Checkers and Game gear up forthousands of walk-in customers tomorrow on what is expected to be the biggest shopping day of the year, PwC research shows each year, more and more South Africans are opting for online shopping, with 43% of this year’s Black Friday shoppers heading to e-commerce sites.

Many of these sites are prepared to run a mini charity, offering mega discounts in the hopes to hook unique, first-time shoppers.

Online sites Takealot, Zando, TFG (formerly known as The Foschini Group), bidorbuy, Superbalist and Massmart told ITWeb they will run online deals up to five days after Black Friday, offering anywhere between 20% to 40% discounts on tech goods such as laptops, smartphones, fridges, washing machines and online games.

Arthur Goldstuck, ICT analyst and MD of World Wide Worx, believes that while Black Friday holds massive promise for both retailers and shoppers alike, local e-commerce sites are hoping to make bigger gains in the long run, and are willing to make a loss on a handful of mega discounts, in exchange for a significant number of first-time shoppers.

“In most cases, the deals that are offered by legitimate sites are genuine deals. The problem is that there is an impression that everything will be discounted, but that’s not the case. While I haven’t seen a half-price discount on tech goods, consumers can get discounts of up to 40% on some products that are on special.

“These deals are an incentive to get unique users to their sites, which is really important for SA’s e-commerce space, which has an uptake of less than 5% of overall shoppers.”

This marketing strategy, he explains, is referred to as “loss leader” pricing. It involves selecting a handful of retail products to be sold below cost – at a loss to the retailer – in order to gain more customers on the platform.

“The loss leader is a strategy that many retailers will be using to attract unique customers to their sites, with the hope that they will buy other things that are not on special on the day, and then keep coming back in the long-term. In terms of uptake, SA’s e-commerce sector is way behind the UK, US and China, where online shopping is part of an average shopper’s routine.”

China's online shoppers hit 610 million as of December 2018, up 14.4% year-on-year. The US is projected to have around 231 million online shoppers by 2021, according to Statista.

According to financial services firm BankservAfrica, last year, South Africans spent R2.89 billion in card transactions on Black Friday sales, a 15.92% rise in sales compared with 2017.

Despite the current economic downturn, the company says it is expecting a higher number of transactions this year, as consumers hope to double up onshopping bonanzas.

Speaking to ITWeb recently, Takealot CEO Kim Reid said last year, the e-commerce site gained an average of between10 000 and 15 000 new users a day, during the Black Friday, Cyber Monday period, and this year it is hoping for a 40% increase in new users.

Takealot says its Black Friday gross merchandise value grew 125% from 2017 to 2018, with orders up by 127%, generating revenue of R196 million in 2018. This year, SA’s biggest shopping site is eyeing an estimated R350 million in revenue.

Refilwe Boikanyo, communications manager at Massmart Group, says in 2018 the group, which owns Game, Makro and Builders Warehouse, among others, reported group sales of R1.8 billion on Black Friday.

“Makro made its first R200 million within 15 hours on its online platform, which is equivalent to what our biggest online competitors made for the entire Black Friday trading period. Our trading brands are among the most popular Black Friday destinations for electronic appliances, hi-tech products and festive season consumables.”

Discussing retailers’ preparedness to handle a large number of shoppers on their Web sites, Goldstuck explained that most sites have been preparing from Black Friday 2018, in order to not allow history to repeat itself.

“Most retailers have made enough provision to avoid any pitfalls they may have experienced last year. For instance, Takealot’s credit card provider was not able to meet the demand. But it looks like as with most retailers, this year they are ready. But we can still expect downtime from those who are not prepared and don’t have a scalable architecture.”

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