Hitting the jackpot on Black Friday without ending up with credit scars
DURBAN - Some people love it. Some people hate it. But whatever your feelings on Black Friday, the one thing you can’t do is ignore it.
South African retailers and consumers alike have embraced America’s favourite shopping day in all its excess. And in case you thought we might have a subdued Black Friday this year, search trends show otherwise.
Black Friday can be incredibly profitable for retailers and smart consumers alike, but we need to go into it with a reality check. It’s been an incredibly tough financial year for us as South Africans, and we can’t go in with the same mind-set of finding a bargain at any cost.
Half of Black Friday accounts are in arrears six months down the line
I’m a big believer that Black Friday is a marvellous opportunity for retail, but there’s a way to do it wrong and a way to do it right. And I’m not just talking about avoiding frenzied crowds bashing down doors.
As the Chief Executive of TransUnion Africa, I get to see a different picture than most people, and how their spending and lending habits on Black Friday might affect them down the line.
It’s been speculated by many commentators that Black Friday is one of the more dangerous times of the year for poor credit behaviour if consumers don’t carefully think about their purchases before swiping. To confirm this, we looked at new account openings made during the week of Black Friday 2018 (19-26 November) compared to the same week a month before. The results were eye-opening.
We found that people were more likely to take out loans and increase their spending limits during Black Friday period - to the tune of a 37 percent increase in new accounts and a 21 percent increase in total credit limits for new credit cards, clothing and retail revolving accounts.
The majority of this growth came from higher-risk loans - there was a 49% increase in retail installment accounts (normally used for furniture and electronics) and a 30 percent increase in retail revolving accounts (normally used for electronics, homeware and general appliances).
That’s not unexpected - home electronics and appliances are as much a part of Black Friday as presents and crackers are of Christmas. The problem comes after the madness has worn off. Our data found that six months on, just over half of new retail revolving accounts taken out during Black Friday 2018 were more than one month in arrears.
So, shoppers beware. That flat screen TV or PlayStation that’s on special for half the price might seem like a good bargain at the time, but it could lead to some very nasty debt down the road.
Top Tips for Beating the Black Friday Blues
Now for the good news. Black Friday doesn’t have to end in tears and arrears. By following these simple rules, you can avoid getting caught up in the hype and walking away with a maxed-out credit card and seven new retail store accounts you can’t afford.
1. Start with a health check
Before you start dreaming of shopping carts full of electronics, take the time to know your own financial health. Do you know what you already owe? Have you pulled your credit report to see whether you have debts you are unaware of? The more you understand your current financial health, the more realistically you can set limits as to what you can afford.
2. Know Your Target
It pays to do some basic prep work in the weeks leading up to Black Friday and Cyber Monday. Go in with a plan of what you’re looking to get out of it - is your washing machine in need of an upgrade, for example. Focus on a few things that you need, especially when it comes to big ticket items like furniture and home appliances. Be ruthless if you have to be - if you want five things but can only afford one, rather devote your time, energy on the one thing you need the most.
3. Don’t Roll the Dice When it Comes to Price
With your targets set, it’s time to do the groundwork of what you’re likely to pay. Search on Google, Bing or price comparison sites like pricecheck.co.za to get a feel for what the products you’re looking for normally cost and what retail sites you might find them on. Go to the online sites themselves and see what the current price is. Knowing the prices beforehand will allow you to sniff out the real bargains and avoid misleading “discounts” that aren’t what they say they are.
4. Put Your Chips Aside
Waking up on Black Friday can feel like stepping into a casino - there’s just way too much to see, do and spend, and you’ve got the temptation to play until you hit the jackpot and find a really great bargain. That’s why it’s a good idea to follow the old gambler’s credo of only putting down what you’re willing to lose. Set a maximum spend limit based on your research of what your must-have items cost and what you can afford, and stick closely to it on the day.
5. Set Your Sights on the Right Sites
Just like there’s nothing more fun than hitting the jackpot, there’s also nothing more annoying than missing out on it because you’re too slow. Let your Black Friday wish list guide you. Bookmark the relevant retail sites and even product listings if you’re looking for a very specific item, in order to instantly access them on Black Friday. Sign up to newsletters and download the relevant apps to be served push notifications and check the best deal round-ups that many sites release. Assuming they’re not overrun with people, visit a few physical stores in your area that sell the items on your wish list and head straight to what you’re looking for.
6. Think Before You Pay
Before you finalise your shopping cart or head to the till, take one final look at what you’re about to buy. If you’ve done the research, you should have a good feel for what counts as a well-priced item and what you can get for nearly the same price or don’t really need. Pay cash where possible instead of signing up for a new account or charging to your credit card. When in doubt, drop whatever doesn’t offer good value or isn’t one of your must-haves.
7. Don’t Sweat it if You Don’t Get it
Remember, Black Friday and Cyber Monday are just the start of the festive retail season. Don’t get caught up in the false urgency of timers and limited availability that you buy something you don’t need or that could put you in financial difficulty. Put your wish list aside until it’s time for summer, Christmas, New Year’s and end-of-season sales, and then follow these same strategies.
The countdown has begun. Start your prep-work, set your limits and remember - it’s better to walk away with less than you wanted than it is with unnecessary debt. Shop smart, spend wisely, and you could be enjoying your most successful Black Friday yet.
Lee Naik is the Chief Executive of TransUnion Africa
BUSINESS REPORT ONLINE