Keep debt in check on Black Friday

Hey there, time traveller!
This article was published 27/11/2014 (4204 days ago), so information in it may no longer be current.

The time to have started preparing for Black Friday, apparently, was in late October. That’s because rushing to line up, sometimes in the wee hours of the day, to wait for the store doors to open should not be the starting point for consumers racing for the best deal.

This year, the chatter leading up to Black Friday here in Canada and in the U.S., where the materialistic twist on Thanksgiving took root, is all about the white lies retailers use to stoke the frenzy. And that brings us back to October.

A survey by 360pi, a price-tracking firm, has found some big-name stores that shoppers will mob for door-crashing deals actually raise prices in the weeks leading to Black Friday, so their “sales” look cut-rate. So if buyers check out prices in October, they would have a better idea whether that Black Friday price is a sale at all.

Here’s a little more caveat emptor to temper the carpe diem: Playing with prices is just one tactic retailers employ. Another is the loss-leader, which gets people through the doors: Surveys indicate most of the money buyers spend on the one day is spent in the first store visited, even if most other items have not been reduced.

Some analysts believe Black Friday — a day so coined because of the mayhem in the streets and stores, and because the day that assures retailers will get out of the red — is becoming another Boxing Day in Canada.

Can Canadians afford two Boxing Days?

Data on the day-after-Christmas sales are hard to come by, but Statistics Canada tracks monthly spending. Last year, reported retail sales hit $40.2 billion in December, a drop from November but a significant rise of 3.4 per cent year over year. (The agency suspects lousy weather, cross-country, around Christmas in 2013 was to blame for the month-over-month drop.)

All of this shopping is contributing to personal debt, at a time when consumer debt load — consumer credit, mortgage and other loans — is at or near record levels. It hit its peak, according to Statistics Canada, in 2013 at 164 per cent of disposable income, on average. It hasn’t budged far since; this year it sits at 163 per cent.

The worry is not so much the debt load vs. wealth — average household wealth is also rising due to house values — but that should historically low interest rates start to head north, many Canadians will buckle under the monthly costs of the debt. That would have implications for the housing market and for personal bankruptcy.

It has been decades since the holidays evolved from auspicious religious celebrations that marked the Lord’s birth and the post-harvest gratitude of Pilgrims, into manic rushes to steal the deal to fill the family’s gift wish list, or simply to get one of the handful of 50-inch screens retailers offer as bait.

Canadian retailers are investing more of their marketing into Black Friday and the following Cyber Monday, when deals shift online, to keep shoppers at “home.” The falling value of the Canadian dollar may be their best friend this year.

It is not a bad thing for shoppers to join in on Black Friday, particularly if it means they will get the better price on those items they would buy at some point, to put under the tree. A little homework weeks in advance, before the frenzy, helps to sort through what’s a deal and what’s been gamed into looking like a discount. Retailers and manufacturers work to ensure profit margins don’t suffer, a fact surveys of sales and profits bear out.

In their corner, consumers have a variety of resources, at a keystroke, to compare prices and products. Shopping in the calm of the living room is a rational defence against the financial hangover that can follow the “charge-it” season. It’s hard to think clearly while sprinting in a mob to the store aisle where the too-good-to-be-true is on offer. Hope feeds impulse buying, but so can disappointment. Who wants to go home empty-handed after waiting in line for hours?