Wholesalers priming retail for shopping spree

A rampant wholesale sector has been busy laying the tables of retailers for the inevitable shopping spree that is associated with Black Friday, Cyber Monday and Christmas shopping in general.

Several competing myths exist over the origin of the term “Black Friday”, a day that has become associated with the start of the Christmas shopping season.

Origin of Black Friday

The earliest record of this term can be traced back to 153 years ago. According to GoldBroker Ltd, Black Friday is a term used to describe the panic on Wall Street over the initial rise and then rapid fall of the price of gold on Friday, September 24, 1869.

In the 19th century, financial markets were largely deregulated and manipulation practices were widespread. Two speculators, Jay Gould and James Fisk, were at the forefront of a scheme attempting to manipulate the price of gold, a collusion that also involved the brother-in-law of Ulysses Grant, the American President at the time. Crowds in New York went as far as to attack some banks and brokerage houses, several of which became bankrupt.

On September 24, 1869, this resulted in the price of gold collapsing by nearly 20%, going from $162 to just over $130 per ounce in the space of a few hours.

A second explanation that dates back 70 years is tied to the Police of Philadelphia, which used to call the Friday and Saturday after Thanksgiving Black Friday and Black Saturday, due to large crowds that had descended upon the city because of the Army-Navy football game held on the Saturday after Thanksgiving each year.

Neither of these two events were, however, directly associated with the kind of shopping spree that characterises Black Friday today. It seems plausible, therefore, to link the term to the prospects for retail sector profits ensuing from the de facto public holiday on the Friday after Thanksgiving each year (it is an official public holiday in 20 states in the US).

Several decades ago, it was standard accounting practice for merchants to record losses in red ink and profits in black ink. Black Friday marked the start of a period lasting until Christmas when most retailers would benefit from increases in turnovers and be “in the black”.

Rampant wholesalers

According to research by JungleScout, South Africa is one of 129 countries that observe Black Friday. Although many countries only started to follow this trend during the past decade, it has now spread to around two-thirds of the globe.

Judging by the sterling performance of South Africa’s wholesale sector in September, retailers are bound to break sales records during the last five weeks of 2022.

In September, the year-on-year growth in the value of wholesale trade amounted to a staggering 31% in nominal terms and almost 24% in real terms, with the category for household goods the only one that posted a decline.

Ever since the worst effects of the Covid-pandemic, the country’s wholesale merchants have been making a habit of breaking records and 2022 will not be an exception. Between September 2021 and September 2022, nine of the eleven allocable categories of wholesale trade recorded double-digit real growth, with five of them above 20%.

It is especially encouraging that the wholesale trade groups for machinery & equipment and construction materials have kept pace with the overall pace of wholesale trade expansion, recording year-on-year real growth rates of 23.8% and 17.5%, respectively. These two groups are inherently tied to capital formation and infrastructure development and will hopefully continue on a sustained growth path in 2023.

If the survey sample group for retail trade utilised by Stats SA is indeed representative, the strong performance of wholesale trade should inevitably manifest itself in record retail trade sales during the fourth quarter of 2022.

Consumption expenditure by households is the main driver of economic growth around the globe. In South Africa’s case, this dominant demand component represents more than 62% of GDP and the latest wholesale trade data will provide cheer to National Treasury, with VAT receipts likely to exceed the budget estimates by a considerable margin.