Black Friday and Consumer Debt: What’s the Real Cost of Those “Unmissable” Deals?

12-12-2024

Black Friday and Consumer Debt: What’s the Real Cost of Those “Unmissable” Deals?

Introduction: The Great Australian Shopping Frenzy

Black Friday—a once American tradition—has now firmly planted its roots in Australia. From a mere day of deals to an entire month of markdown mania, it’s evolved into a retail juggernaut. Shoppers line up virtually (and occasionally physically) to score bargains they didn’t even know they needed.

In 2023, Aussies dropped a staggering $7.5 billion during Black Friday and Cyber Monday. That’s right billion with a B! But while retailers celebrated, many households woke up to a nasty financial hangover. Credit

cards were maxed out, Buy-Now-Pay-Later (BNPL) payments loomed, and suddenly, that new 75-inch TV didn’t seem like such a brilliant idea.

Let’s dive into the deeper implications of Black Friday spending on Australian households and businesses and how we can all avoid turning festive cheer into fiscal fear.

The Debt Burden on Australian Households

Black Friday promises great deals, but for many, it’s a slippery slope into debt. Here’s a closer look at the double-edged sword of consumer spending.

1.  Rising Credit Card Debt: A Slow Burn

You swipe, you smile, you score the deal of the year. But then, the statement arrives, and suddenly you’re sweating more than a kid caught with chocolate before dinner.

  • According to the Reserve Bank of Australia (RBA), the average credit card debt in 2024 hit $3,400 per household.
  • Worse, nearly 40% of these balances accrued hefty interest With the average credit card rate sitting at 19.94%, a $1,000 Black Friday binge could take over a year to pay off if you’re making only minimum payments.

Fact: That $300 “bargain” might end up costing you closer to $400 by the time you’ve cleared the debt. A bargain? Maybe not.

2.  The BNPL Dilemma: Easy Pay, Hard Consequences

BNPL services like Afterpay and Zip have skyrocketed in popularity, especially among younger Australians. Why pay now when you can pay later, right? Well…

  • During Black Friday 2024, a whopping 30% of online purchases were made using BNPL
  • But here’s the kicker: 20% of users missed at least one payment last year, triggering late fees and— you guessed it—more debt.

Millennials and Gen Z, facing rising rents and flatlining wages, are particularly vulnerable. A shiny new gadget may bring short-term joy but missing a payment can quickly turn that joy into dread.

3.  Debt and Mental Health: The Unseen Cost

Debt doesn’t just drain your bank account—it messes with your mind. According to a report by Australian Psychological Society, Australians drowning in debt are twice as likely to experience anxiety and depression.

After Black Friday, many face:

  • Sleepless nights wondering how to make ends
  • Tense conversations with partners about “necessary” “impulse” buys.
  • A lingering sense of regret every time they see that unused gym equipment, they swore would change their life.
The Ripple Effect on Local Businesses

Black Friday isn’t just a consumer headache, it’s a challenge for businesses too. Sure, sales skyrocket for a week, but the aftershocks can be brutal.

1.  Post-Sale Spending Slump

After splurging in November, consumers tighten their wallets in December. Retailers who bank on the holiday season often see a dip in sales.

  • In 2023, December sales dropped 9% compared to the previous
  • The Australian Retailers Association reported that while Black Friday sales surged by 15%, discretionary December spending fell by 8%.
2.  Higher Return Rates: Buyer’s Remorse in Full Swing

Impulse buying leads to regret, which leads to returns.

  • Australia Post reported a 25% return rate for Black Friday purchases, far higher than the usual 10%.
  • Returns don’t just eat into profits, they increase logistics costs, from restocking to reverse
3.  Cash Flow Woes for SMEs

Small and medium-sized enterprises (SMEs) often face a cash flow crunch post-Black Friday.

  • A survey by Xero found that 43% of SMEs experienced cash flow issues after the sales
  • Delayed payments from BNPL providers and increased returns exacerbate the problem, making it tough to pay suppliers and staff.
Strategies for Surviving the Black Friday Fallout

Not all is doom and gloom! With a bit of planning, both consumers and businesses can emerge from the Black Friday blitz relatively unscathed.

For Consumers:
  • Set a Budget:

Decide what you really need (no, a seventh pair of sneakers isn’t essential). Stick to it!

  • Limit BNPL Usage:

Using multiple BNPL services can lead to overlapping payments. Keep it simple—one service at a time.

  • Prioritize Debt Repayment:

Knock out high-interest debts first. Credit card interest can snowball quickly, so don’t let it linger.

For Businesses:
  • Educate Customers:

Offer financial literacy tips. A customer who understands responsible spending is more likely to return.

  • Flexible Return Policies:

Make returns easy but set clear guidelines to manage costs.

  • Launch Loyalty Programs:

Reward repeat customers with discounts or points. A loyal customer base is a steady revenue stream.

FAQs
Q1: Is Black Friday worth the debt risk?

It can be—if you plan wisely. Stick to essentials, avoid impulse buys, and manage your payments responsibly.

Q2: How do businesses benefit from Black Friday despite the risks?

While returns and cash flow challenges exist, the event boosts brand visibility and attracts new customers who may become repeat buyers.

Q3: Are BNPL services better than credit cards?

They can be, but only if you make payments on time. Otherwise, late fees and overlapping debts can be just as problematic as credit card interest.

Conclusion: Balance Is Key

Black Friday is a retail extravaganza that offers tempting deals—but it comes with strings attached. For consumers, it’s about resisting the urge to overspend and managing debt smartly. For businesses, it’s navigating the fine line between sales boosts and post-sale challenges.

At VNC Australia, we’re all about financial resilience. Whether you’re a household managing holiday debt or a business optimizing cash flow, our expert accounting services are here to help. Contact us today and let’s turn financial chaos into clarity!

Happy (and responsible) shopping!