Millions of Australians are readying to spend big during the four day weekend known as the ‘Black Friday’ sales, even though they’ve spent recent months stockpiling savings and paying down credit card debt.
ING Research suggests 8.3 million Australians -- almost a third of the country’s population -- are planning to buy goods during the ‘Black Friday’ and ‘Cyber Monday’ shopping weekend, commencing tomorrow and ending on 30 November.
The research, a national survey of 1016 people conducted in November, found about 2.9 million people will be shopping during the event for the first time.
“Value for money matters more now than it has in a long time,” George Thompson said, head of daily banking at ING.
“So it makes sense that so many Aussies are planning ahead and using the ... sales to shop for gifts and important upcoming events.”
People are widely expected to stockpile their purchases for upcoming events. About 58 per cent are hoping to pick up discounts on gifts for Christmas, birthdays and back to school items
A sales spike greater than 400 per cent
The four day shopping season has led to a surge in online purchases -- and social distancing measures could help the trend grow.
Sales were up by 465 per cent on Black Friday last year when compared to the prior three weeks, according to CBA, and 107 per cent on Cyber Monday.
Clothing sales were up by 264 per cent, while furniture, household appliances and hardware sales lifted by 202 per cent.
“Some of our major retail clients will be extending their Black Friday and Cyber Monday sales to capitalise on increased retail spending,” Jake Potgieter said, managing director for industries, transport and consumer at CBA.
“By all indications, many of our clients are preparing for the largest online sales period on record.”
A shopping frenzy during a pandemic
Australians have been doing the opposite of spending during the COVID-19 pandemic. The people in a position to do so have been paying down debts and stockpiling savings, giving them the breathing room to spend.
People have been squirreling away more of their money, according to the most recent data from the Australian Bureau of Statistics (ABS). The households savings to income ratio was 19.8 per cent for the June quarter, up from 7 per cent when compared to the previous quarter.
This was almost twice as high when compared to the Global Financial Crisis, when the ratio was 8.9 per cent lower at 10.9 per cent.
Savings, Mastercard or Afterpay?
How we pay for things has changed a little and the pandemic appears to have hastened some of it. Some people are using credit cards less, while others are turning to buy now pay later options.
Australians lowered their credit card debt by $6.91 billion in the six months to September, according to the Reserve Bank of Australia (RBA), dropping the national credit card balance to $26.98 billion -- its lowest level since late 2004.
There were about 654,000 credit cards less over the same period, a drop of 4.8 per cent, reducing the total number to about 13 million.
Despite the debt being paid down, there are signs people are gearing up to spend again, as transactions increased from August to September.
“People were clearly out shopping more and putting more on their cards,” Sally Tindall said, research director of RateCity.
“The question is whether they are going to continue to be diligent in paying down their debts.”
Conditions -- increased savings, lower debts, lock downs and a sales bonanza -- could see people making purchases on their credit cards during the Black Friday sales.
“If you’ve focussed all year on clearing your credit card debt, try and resist the temptation to blow the budget this Christmas,” Ms Tindall said, “otherwise you could find yourself back to square one in the New Year, struggling to pay down high-interest debt.”
Late fees have people skipping essentials
The prospect of a big spending weekend comes after the corporate regulator released a controversial report on the nascent buy now pay later category.
The Australian Securities and Investment Commission (ASIC), having analysed data from the six large providers, four banks and a consumer survey, found one-in-five people were skipping essentials like meals to avoid paying late fees.
“Buy now pay later arrangements are clearly popular as a payment method,” ASIC said. “While working for the majority of users, some consumers are suffering harm.”
There were 6.1 million accounts with Afterpay, BrightePay, Humm, Openpay, Payright and Zip Pay in 2019. About 21 per cent of them were being charged late fees, amounting to $43 million.
And out of the 1.1 million late transactions, 45 per cent were being hit with them multiple times.