If you haven’t been swept up in the Black Friday craze in South Africa, you’re in the minority – but there’s good reason why we’re so susceptible getting caught up in the hype cycle.
While not everyone may be in the financial position to go on a huge shopping spree this Friday, many will be tempted and coerced into joining the queues to pick up a deal.
That’s because ‘big discounts’ play on some of our most easily manipulated impulses – and retailers know exactly which buttons to push.
Auditing firm and consultancy group PwC has published an analysis of Black Friday in South Africa, which includes a closer look at seven traps many consumers fall into.
The seven pitfalls are part of behavioural economics, PwC said, which can help consumers understand how context drives their purchasing decisions, and could help them avoid making costly mistakes.
Globally, retailers have generated a hype around the Black Friday phenomenon. Although it is relatively new in South Africa, local interest is at an all-time high.
Black Friday is framed as a once-a-year sale, and consumers view it as an extraordinary event and associate it with extreme price cuts.
However, Black Friday is arguably just another seasonal sale and its status as an exceptional event should not compel us to make purchasing decisions that we would otherwise not have made.
2. Scarcity and loss aversion
Panic spreads when shoppers fear they may miss out on the best sales deals.
Retailers commonly spark consumers’ interest by highlighting limited stocks available for a limited time only, which raises the perceived value of these goods – after all, rarity and value are deeply intertwined.
While the sense of scarcity can further trigger the need to act, we should look out whether we would truly miss out, or are captured by the rush of the chase.
We find comfort in fitting in with the actions of others, which has its roots in our own evolution. However, the actions of others can also drive us to irrational behaviour.
With many South Africans wholeheartedly buying into the craze of Black Friday, we feel we should join in.
Marketers welcome the crowds on Black Friday, since crowds attract more crowds. Few shoppers feel guilty buying a 50% off toaster when the customers next to them have flat screen TVs in their carts.
When our peers are doing it, the painful experience of parting with money becomes an act of social cohesion.
4. The halo effect
One exceptionally good sales deal can create the perception that all of the retailer’s deals are also steals by association.
This phenomenon – termed the ‘halo effect’ – means consumers will have difficulty viewing the deals on Black Friday in a nuanced way, where some may be highly discounted, but others may not.
A retailer baiting with one or two exceptional discounts may not offer uniformly discounted products and consumers should weigh each purchasing decision with equal scepticism.
5. Confirmation bias
As consumers, we are likely to factor out any additional costs associated with our shopping trip on Black Friday, including transport and parking costs, time and effort.
As we buy into the idea of Black Friday, we want to believe we are truly making savvy money decisions.
Thus, we are likely to count only the per-item savings to confirm this belief, rather than considering whether going out of our way for the shopping excursion is truly worth our while.
6. Initial pain
It hurts to spend an initial R50, but it is much easier to spend a further R10, R20, or even another R100 after that initial purchase.
The amount of pain we experience decreases with every extra rand after the initial payment, paving the way for excessive spending on things we would otherwise not purchase on Black Friday.
7. Sunk cost fallacy
Once we have started to invest, we tend to struggle to close out investments that prove unprofitable.
On Black Friday, if we have already made the initial upfront investment of getting up before sunrise, driving to the mall, finding parking and waiting in line for the store to open, we will be inclined to buy more than we initially came for.
No matter the upfront investment, it remains helpful to consider at each point whether the purchase is worthwhile and whether it brings us closer to our longer-term financial objectives.