|Stronger rand to drive Xmas sales|
Wednesday, 25 November 2009 02:00
SA`s stronger currency could bring some cheer to technology retailers this festive season.
Chris Gilmour, Absa Investments analyst, says technology retailers such as Incredible Connection and Dion Wired will benefit from savings passed onto them by suppliers.
The festive season trading period, which is at its most frenetic in the two weeks before Christmas, can account for as much as two normal trading months for retailers, says Gilmour.
Last year, retailers had to deal with a weak currency that was up to R11 against the dollar. This year, however, the currency has improved by as much as R4, to R7 against the US currency.
Gilmour explains that the stronger rand will make items such as digital cameras, netbooks and printers cheaper, and this is where sales are expected to show growth. “The stronger rand will soften the blow, and make purchases a bit easier to swallow than they may have been for the consumer.”
The retail sector has been hard hit during the economic slump. September`s retail sales, the latest available figures, showed a year-on-year contraction of 5%. However, Gilmour says there is an upward trend, as August was down 6.5% compared to last year.
Gilmour adds that many people may have waited for Windows 7 to hit the shelves, before buying new computing equipment. Colin Erasmus, head of the Windows business at Microsoft SA, says: “We`ve seen incredible excitement around Windows 7, especially the new netbook, notebook and PC models that have come to market designed specifically for the operating system.”
He adds the company is “seeing really powerful computers pegged at pretty reasonable prices, and this should drive festive season demand”.
Just in time
Patrick Raymond, CNA merchandise executive, says prices have come down across the board in the past month-and-a-half as suppliers gear up for festive season advertising. He explains, however, that some suppliers had taken forward cover against the weaker rand and can not change their pricing now that the currency has strengthened.
Other suppliers have been passing on price decreases due to the rand`s strength, which they hope will aid sales during the festive season, says Raymond. However, he says it is difficult to predict whether this will flow through to increased sales over the festive season. “It`s difficult to call, because money is very tight this year.”
Stay at home
Incredible Connection CEO Dave Miller says the company is seeing year-on-year growth in the gaming and entertainment categories, despite declining retail sales over the same period. “People will look to alternative forms of amusement and entertainment in more pressing economic times and gaming offers them such avenues,” he adds.
Miller explains that the rand strength makes items such as notebooks and PCs more cost-effective, as they are imported on dollar-based currency. “People see it as a more value-based purchase because of the savings they are able to gain,” he adds.
Brian Leroni, Massmart corporate affairs executive, says Makro – one of the retailer`s subsidiaries – has seen prices come down in some areas.
Prices of laptops, PCs and printers have not dropped, but specifications have been upgraded, while prices have remained the same, offering more value to consumers.
However, gaming consoles are cheaper, and newer models are being launched at substantially better prices, Leroni says. Photographic equipment has also become cheaper, he adds.
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