Deep discounts simply reduce margins for retailers. Photo / Getty Images
Deep discounts simply reduce margins for retailers. Photo / Getty Images
OPINION:
Australians were expected to spend $1 million a minute in the four-day shopping orgy known as Black Friday and Cyber Monday.
The spendathon, which continues until the end of Monday will generate A$5.5 billion in sales around the country, the National Australia Bank forecasts.
While Australians don't celebrate Thanksgiving,many of us are celebrating Black Friday. A study by Boston Consulting Group shows 82 per cent of Australians plan to participate in this year's Black Friday sales, up from 43 per cent in 2020.
In fact, the Australian Retailers Association says the uptake of Black Friday sales over the past few years has nudged November ahead of the Christmas period as the busiest time for Australian retail sales.
This year's sales come after a year and a half of coronavirus and Australians are well and truly cashed-up. For large parts of 2020 and 2021 we have been in lockdown and prevented from spending our cash in restaurants, in shops and on travel and many people have saved stimulus cheques from the government.
JB Hi-Fi, Kmart, Myer and online retailer Kogan added to the hype by unveiling heavily-discounted items well ahead of the traditional Friday start.
According to the Commonwealth Bank of Australia, clothing retailers recorded a 34 per cent spike in spending over the Black Friday period compared with the previous year, cosmetics were up 46 per cent, furniture businesses recorded a 33 per cent boost in spending, and electronic sales rose 26 per cent.
The big discount days originally started as online retail events, and while they have now expanded into bricks and mortar retailing as well, the proportion of online sales in Australia doubles over the weekend. About A$2 billion is expected to be spend online this Black Friday and Cyber Monday.
There is the question of who wins out of Black Friday and Cyber Monday.
Creating a lot of hype about and fostering a sense of urgency with fast-expiring offers can certainly induce a frenzy among shoppers, with the result that they'll buy a lot of rubbish they didn't know they wanted and have no use for.
On the other hand, there are suggestions that savvy shoppers defer their purchases and wait for these sorts of events and deny retailers of the fat margins they can earn on fully-priced stock. Certainly, retailers have been concerned for several years about the growing trend for some consumers to put off their "Christmas" shopping until the December 26 Boxing Day sales.
And shoppers now expect a discount as a matter of course.
"Millions of dollars are spent in price promotions every year, representing one of the key levers for retail and consumer goods businesses. Arguably, Australian consumers have become conditioned to these promotion mechanisms, as shown in Australia's high portion of sales on promotions," Big Four consulting KPMG wrote in its Australian retail outlook for 2021.
Arguably neither wins. While retailers boost their sales and potentially get rid of stock they couldn't otherwise sell, they are costing themselves sales and margins at other times of the year. Many smaller retailers don't want to take part, but feel they have to in order to retain market share.
And shoppers indulge in mindless consumerism. It's essentially retail gluttony that turns their homes into a pitstop between the retailer and landfill.
The Black Friday sales tradition was imported to Australia from the US, where it ties into the Thanksgiving holiday.
We would probably be better off without it.
And a property sales frenzy
Retailers weren't the only sellers expecting a shopping frenzy over the weekend.
Australia was getting set for its biggest property auction weekend ever, with a record 4354 homes listed to go under the hammer, as property owners rushed to get their homes on the block.
Auction listings were double that of the corresponding week last year could go higher still as vendors rush to sell their properties in the next couple of weeks before Christmas.
Aside from the annual desire to have sales wrapped up by Christmas, there's another dynamic going on. Vendors nationwide are racing to beat what they perceive to be a looming market correction that will see prices fall.
House prices have surged 22 per cent this year.
But property market forecasters expect growth to slow next year and for prices to fall in 2023.
House prices surged 22 per cent this year in Australia. Photo / Getty Images
The Commonwealth Bank of Australia expects Sydney house prices to rise 7 per cent in 2022 and peak. Then they will drop by 12 per cent and in Melbourne by 10 per cent in 2023 as the Reserve Bank of Australia takes the cash rate to 1.25 per cent from its long-term historic lows.
As rates rise, it will reduce the capacity of property buyers to borrow from banks, and significantly cool demand. The extent of the price falls depends on how much and how quickly interest rates rise, particularly in the current environment where household debt is so high.
