Black Friday might be known for mayhem, door-buster chaos, snaking queues and stampedes, but it’s also an opportunity to snag a great deal and save money. With retailers and lenders now incorporating the shopping celebration into their annual marketing strategy, it’s to the benefit of consumers, who “box smartly” and don’t fall for the hype.
The US shopping bonanza, which takes place on the Friday after Thanksgiving Day was brought to South Africa by Takealot in 2012. It’s grown into a significant day on the retail calendar and for many consumers, a cheaper way to stock up on items.
It’s also been marked by mayhem and blowing the budget on “wants”, not needs, with some calling it one of the most dangerous times of year for poor credit behaviour, because consumers don’t exercise enough caution before swiping.
With the economy under strain, many consumers are pursuing bargains at any cost - without exercising much discretion.
Too good to be true
The truth is, retailers are banking on the frenzy and emotion attached to Black Friday. They’re not in it for altruistic reasons: the shopping bonanza is an opportunity to offload old-of-date stock, entice customers with limited stock of “loss leaders” so they also spend on regularly priced items, and even hike prices in the run-up to the period to reflect even greater discounts.
In 2017, UK consumer watchdog Which? cautioned that Black Friday “deals” are hardly ever as good as consumers are led to believe. It tracked the prices of 97 products sold during Black Friday and found that in most cases the “deals” were rarely at the rock-bottom prices shoppers expect. It said 87% of the Black Friday deal items were available for the same price or cheaper at other times of the year.
New debt burden
Credit bureau TransUnion says it’s concerned about the amount of new debt taken on during this period. It compared the numbers of new account openings made over last year’s Black Friday week with the same week a month before, and found consumer appetite for loans and increasing their spending limits over Black Friday was greatly heightened.
New account openings spiked by 37% and total credit limits for new credit cards, clothing and retail revolving accounts by 21%.
Whether or not this increased demand is lender- or consumer-driven is unclear. TransUnion says its customer base “includes all of the large and reputable retailers who we believe take compliance seriously - especially in the tough economic market climate”.
Most of this growth came from higher-risk loans. Retail instalment accounts (mostly for furniture and electronics) increased sharply by 49% and retail revolving accounts (normally used for electronics, homeware and general appliances) went up by 30%. Only six months later, more than half of these new revolving accounts taken out during that Black Friday period were more than a month in arrears.
Know your limits
TransUnion Africa chief executive, Lee Naik, says Black Friday’s too big and too pervasive to ignore.
They’re concerned about the fallout for consumers who are already overexposed to credit because they don’t know their limits.
“In South Africa, we have 25million credit-active consumers. Most of them, however, don’t know their credit status, which is extremely worrying. Every person is entitled to a free credit report every year, but only 400000 unique consumer credit reports are requested.”
Naik says by accessing information that is available for free, consumers can understand their payment patterns, whether they’re approaching bad credit status and what their risk is.
“Knowledge is power. When you walk into Black Friday, knowing your credit status and your exposure, you’re a better, more empowered consumer.”
Black Friday, he believes, isn’t only a risky period for consumers: It’s also a great opportunity for the thrifty to save: “Consumers should incorporate it into their annual financial plan. The retailers use Black Friday to market themselves; consumers should use it as a way to spend sensibly and even save money.”