It’s that time of year again when all our favourite stores and retailers have begun promoting juicy specials and deals ahead of Black Friday, set to take place on 29 November.
But, while many people will be willing to spend hours in traffic and queues to buy that fancy new flat screen, the truth about Black Friday is that not all the deals on offer are necessarily built to help you save money. Instead, many retailers are seducing consumers into impulse buying, or overspending on goods that you don’t need and haven’t budgeted for rather than building real wealth through saving and investing.
And to put things into perspective, it is not just our government that finds itself being drawn into a debt-trap – South Africans are infamous for living beyond their means, often driven by the desire for instant gratification. A debt-trap occurs when you are unable to repay even the interest due on a loan.
For example, according to latest statistics from the South African Reserve Bank (SARB), the ratio of household debt to disposable income reached as much as 72.7% in the second quarter of 2019. This ratio, which is a measure of the indebtedness of households in relation to their ability to pay back their borrowings, reflects a South African household sector that is drowning in debt.
However, resisting the siren-call of sales usually requires preparation and mental fortitude. With that in mind, you can avoid the snare of overspending and wasting your hard-earned money by following these simple tips:
1. Ask yourself an essential question:
There is one essential question that you should ask yourself before making any purchases: “Do I actually need this?”
Remember, for most retailers Black Friday represents an opportunity to move all the goods that they haven’t been able to sell during the preceding months. As a result, many of the items and brands that stores put on sale are the goods that you wouldn’t normally consider purchasing.
Additionally, some retailers – particularly in the US – have been caught red-handed in the past for using techniques such as fictitious pricing, or using a false original price, to convince you that you are getting a good deal in order to encourage you to buy.
In December 2016, for example, JCPenney, Sears, Macys and Kohl’s were all the subject of lawsuits related to claims of fictitious pricing.
And a recent study also performed in the US by Harvard Business School Professor David Ngwe found that a $1 increase in the list price (or supposed original price) was just as effective as a $0.77 decrease in the actual selling price in influencing consumers to buy.
So, before you allow retailers to bait you into splurging on that egg-and-muffin toaster, ask yourself whether you actually need it, or whether your existing appliances would do the job just as well.
2. Map out your priorities
Although Black Friday can put a substantial dent in your wallet without the right planning, it’s impossible to deny the great opportunity it represents if you need the discounts.
For instance, a friend of mine once managed to get a bargain on an otherwise ridiculously expensive couch that she wouldn’t have been able to afford at its original price.
The key to finding the right balance and shopping sensibly is to plan first. Set yourself a spending budget, draw up a shopping list of what you need, do your research to get an idea of the pricing on each of the items, and then arrange your shopping list in order of priority.
With a shopping list in hand, you will be less likely to veer off course and spend on things you may later regret.
3. Beware of scammers
Doing your research on costing and value as part of your shopping preparation is crucial if you are to avoid being hoodwinked by sham “deals” which claim to offer far greater discounts than they do.
Additionally, keep a keen eye out for online scammers seeking to take advantage of consumers by luring them into paying for Black Friday deals and items that don’t exist.
You may already be familiar with spam text messages urging you to click on a link to redeem a fake gift voucher or discount. Social media platforms are also inundated with unscrupulous individuals looking to profit off the unwary. Some scammers, for instance, use Facebook to reach a large audience through like-farming, or using click-bait titles and eye-catching posts to convince individuals to either share their personal information (which is then sold), or alternatively follow a link to a website that then downloads malware onto their computers or laptops.
For example, some will remember the fake Shoprite Black Friday leaflet that did the rounds on social media in November 2016, advertising unbelievable savings (quite literally) on a wide range of products. Shoprite later confirmed that this flyer was, in fact, a sham, as they did not participate in Black Friday deals that year.
The list of scamming techniques is endless, so if you do choose to shop online this Black Friday, be sure to only use trusted retailers or research the credibility of the company you are purchasing from first.
4. Don’t shop out of FOMO
Retailers often take advantage of the herding mentality and fear of missing out, or FOMO, to convince you to participate in sales and shopping madness. However, November is only the start of the festive season, which means that even if you avoid the shops this Black Friday, there will be plenty of other deals ahead.
And here it is worth highlighting a 2016 study performed in the UK by independent consumer body Which?, who tracked the pricing of 35 of the most popular tech, home and personal care products that were placed on sale by various UK retailers over the Black Friday weekend. The Which? investigation revealed that 60% of the items monitored were offered at the same price or even cheaper at other times during the year.
So, remember that, at the end of the day, you don’t have to shop on Black Friday at all. And what better reward for a year’s hard work than avoiding running up a huge credit card, and rather entering the New Year with lower debt, a new investment account and with less stress?
Yanga Nozibele, Investment Associate, Cannon Asset Managers