The Black Friday and the Cyber Monday online spending splurge is bad for retailers and possibly poor value for shoppers too, Moody’s Investors Service has warned.
The ratings firm said consumers may well become wary of the shopping phenomenon when they realise in future years there are few bargains to be found.
For retailers, “Black Friday largely brings forward purchases from closer to Christmas, often at lower margins, and is, therefore, credit negative for the European retail sector overall and rarely positive for individual companies,” said senior credit officer David Beadle.
Mr Beadle said “smart retailers” who had chosen to join in the online promotions had only done so “with a carefully thought-out strategy” that protect their profit margins. While “others have decided their overall profitability and brand values are better served by avoiding involvement altogether”, he said, and that “consumers will come to realise true bargains are rare”.
Business group Retail Ireland said Black Friday was having a “distortive effect” and its benefits are now being openly questioned by retailers.
“While the deep discounting and heavy promotional activity is certainly good news for Irish consumers, it does present a challenge for many retailers who have seen an erosion in their competitive position in recent months as a result of a growing inputs costs in areas such as labour, insurance, local authority rates and rents,” said director Thomas Burke.
Some retailers now view the event with “suspicion and an element of dread”, Mr Burke said.
Meanwhile, a Central Bank report on insurance for gadgets, which form a huge slice of Black Friday offers, found one in five consumers were still paying for insurance on goods such as mobile phones and tablets even though they have since taken out a new policy.
Consumer advocacy bodies said consumers had to shop around to ensure they understood all the obligations of taking out gadget insurance. The Central Bank report said, in certain circumstances, product information provided to consumers was inadequate.
Manufacturers and distributors of gadget insurance need to do more to ensure that consumers are made aware of the key product features, benefits, exclusions, how to make a claim, and the cost of the product, the watchdog said.
About 21% of consumers do not cancel existing policies after taking out a new gadget insurance policy and are paying for cover they no longer need, the Central Bank said, while the overall price of gadget insurance is not clearly presented to consumers.
Bonkers.ie, the consumer group, said the findings were unsurprising. “It’s imperative people take the time to read the terms and conditions carefully so they know exactly what the policy covers. Some insurance policies won’t cover you for accidental water damage.
“Many people are often unaware that their policy will also have an excess, which means you’ll have to pay the first part of any claim yourself,” spokesman Daragh Cassidy said.
Brokers Ireland urged consumers to avoid buying insurance in the shop when purchasing a smartphone.
“Add-on insurance is generally not a good idea, it’s better to make a separate, independent transaction for insurance cover,” said Cathie Shannon.