A Black Friday bloodbath? Retail price war threatens to take small businesses to the brink

Tim Ladhams

25th Nov 2025

Black Friday is seen as such a potential bonanza that Australian businesses are seemingly prepared to cut the throats of their competitors, and unknowingly cut their own throats in the process, to get their slice of the pie.

Exacerbating the situation is the reality that what originated as a genuine “one-day only” event has extended its reach. Originally conceived as a marketing opportunity to attract customers in the run up to the Thanksgiving holiday, US retailers came up with the idea of Cyber Monday to ‘bookend’ the holiday weekend and encourage an extended splurge. Now the heavy discounting is extended by large businesses who can operate with smaller margins due to a high sales volume, conditioning consumers to expect that a ‘bargain price’ will be available from late November through to Christmas, and beyond into the more traditional New Years’ sales period.

A race to the bottom

The ultimate victims of this price war ‘race to the bottom’ are small businesses, forced into offering their products at unsustainably low prices in order to maintain custom.

Sarah James, Founder of The Sensory Specialist – a business that creates products to support neurodivergent children and young people with a disability – is a major supplier to major retailers and feels increasing pressure every year to drop her prices at this time of year.

“Australian retailers are slashing prices by 40 to 70 per cent this Black Friday, often selling at a loss, just to stay visible, capture leads, or survive,” Sarah warns. “Some major retailers – and even some small ones – are selling below cost price, just to get cashflow, a customer lead or hit KPI margins.”

The tactics are changing customers’ expectations in Sarah’s opinion. Consumers waiting on discounts devalues products and forces small businesses into dangerous territory. “Small businesses are cannibalising each other, training shoppers to expect sales, and destroying long-term brand trust – all while already operating under financial strain,” she laments.

Price war devalues small-business owners’ hard work

These sentiments are backed up by solid research:  Xero’s Small Business Insights report for the second quarter of 2025 revealed that small-business sales growth is just +3.0 per cent – its lowest growth rate since 2020; the Australian Bureau of Statistics reported in August this year that 370,500 Australian businesses shut down in 2024–25 – an exit rate of 13.9 per cent; and with inflation continuing to outpace consumer spending, small businesses’ revenues are dropping – putting them under more pressure to offer discounts to generate revenue, with those discounts slicing their margins. 

Sarah asserts that she is seeing an unprecedented level of discounting that has created a ‘full-blown price war’ that is ‘brutal’ for small businesses trying to keep their heads above water. “Every time retailers slash prices, they’re not just cutting into profit, they’re cutting into brand trust,” she says. “We’re training customers to shop the sale, not the product.”

• This story was originally published on Inside Small Business.