Black Friday: Balancing Bargains with Financial Responsibility

As we approach Black Friday and Cyber Monday, it is a good time to reflect on what this shopping phenomenon means for us as individuals and as a society. While the allure of big discounts is undeniable, I believe it's crucial to approach these events with a sense of financial responsibility in mind. The positive sentiment expressed by consumers in our most recent TransUnion Consumer Pulse Study (published 20th November), may have been driven in part by the September 0.25% interest rate cut. However, it is worth remembering that despite a subsequent cut later (another 0.25%) in November as well, rates are still relatively high by historical standards, and for highly distressed household incomes the rising cost of living and cost of servicing debt is still considerable.

The History of Black Friday: From Crisis to Consumerism

I wonder if everyone knows the history of “Black Friday”. It is fascinating to note that Black Friday didn't always signify a shopping spree. Its roots lie in a financial crisis back in 1869, when a Wall Street conspiracy sent the US gold market crashing. Later, in the 1950s, it was used to describe the overwhelming influx of shoppers into Philadelphia ahead of major football games, creating challenges for retailers and law enforcement alike.

This historical context is important for us to remember, particularly when we consider the current economic realities in Africa. As mentioned earlier, consumers are grappling with rising costs of living and historically high interest rates. Black Friday, while offering tempting deals, can also intensify financial strain if we’re not careful.

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With Great Power Comes Great Responsibility

The data reveals a concerning trend that younger South Africans are increasingly reliant on credit to manage their finances. This includes the growing popularity of new payment methods like Buy-Now-Pay-Later (BNPL), which offer convenience but like any other credit product need to be used responsibly.

Another emerging financial trend is the newly introduced two-pot retirement system in South Africa. This has paid out over R35 billion since the beginning of September. Discovery Corporate and Employee Benefits reported in October that the main reasons for withdrawals from the two-pot retirement system are home and car expenses (24%), short-term debt (21%), and education (20%).

This situation highlights the critical need to strengthen financial literacy and responsible financial inclusion throughout the continent. We need to equip individuals to make sound financial decisions.

If knowledge is power, then surely knowledge of your credit and indebtedness will allow you to take control of your financial health?

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The Double-Edged Sword of Ecommerce

As somebody who is passionate about both consumer habits and technology, I believe it is briefly worth exploring the ecommerce element and consumer experience.

The ease and accessibility of ecommerce has revolutionised the way we shop. Over the last 12-18 months, we have seen an explosion in the last mile delivery support for both fast food operators as well as general retailers. There is less standing in queues, and you can have your groceries delivered in 60 minutes without leaving your home.

However, this convenience can also lead to impulsive purchases and overspending.

I'll admit, I've even caught myself falling into this trap! I recently almost missed a great deal on a treadmill because I waited too long to make the purchase. This experience served as a reminder that whether we're shopping online, or in-store, informed decision-making and thorough research are crucial.

While transacting can be as easy as a click of a button, this comes with risks to consumers, particularly regarding digital fraud.

According to the TransUnion Sate of Omnichannel Fraud Report, nearly 5% of all attempted digital transactions originating in South Africa (4.9%) and Kenya (4.6%) were suspected to be digital fraud. Six in 10 South Africans and eight in 10 Kenyans said they recently encountered fraud attempts.

While fraud prevention efforts continue to improve, this highlights the need for ongoing consumer education about online safety and fraud prevention.

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Empowering Yourself with Knowledge and Practical Tips

As we enter the Black Friday and Cyber Monday season, let's remember the words of investment guru Warren Buffett: "Price is what you pay, value is what you get". This timeless wisdom applies not only to investments, but also to our spending decisions during these sales events.

Let's ask ourselves:

• Do we genuinely need the items we're tempted to buy, or are they simply wants?
• Have we thought about the long-term financial implications of our purchases?
• Are we taking the necessary steps to protect ourselves from online fraud?

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To help you navigate Black Friday and Cyber Monday responsibly, I want to share some practical tips:

• "Wants" vs. "Needs": Before making a purchase, ask yourself: "Do I truly need this, or do I just want it?" This simple question can be powerful in curbing impulsive buying.
• "Shopping Across the Line": Consider looking for alternatives to the brands or stores that you typically buy from. You might find equally good quality at a more affordable price if you look around.
• Purchasing On Credit: Borrowing to buy something can be helpful, but it's crucial to be realistic about your ability to repay. Be aware of the risks from unmanageable repayments, increased interest costs and falling into a debt cycle.
• Research and Plan: Take time to research prices and compare deals before Black Friday arrives. Having a plan can help you stay focused and avoid impulse buys.
• Check Your Credit Report: As I’ve said earlier, knowledge is power when it comes to your financial health. Understanding your credit score and financial standing is important before making major purchases. You can access your credit report by multiple sources, often including your bank or lender as well as via credit bureaus like TransUnion.

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Financial well-being is an ongoing process. Black Friday and Cyber Monday can be fantastic opportunities for both businesses and consumers. Let's approach these shopping events with responsibility and a commitment to making wise choices that will benefit us in the long run.