Black Friday
John Valla
Although it may seem early many retail stores across the country are beginning preparations for black friday. On november 24, 2017 the “Christmas-shopping season” begins. Black Friday is now a nationwide “deal day” where retail stores drop their prices with “door-buster” deals. If you are like me you may be wondering how retail stores are able to give such good deals, and there are three major reasons that companies are able to afford these massive discounts. The first reason is the large increase in foot traffic. The world of retail is getting better and better at marketing sales for “black friday”. One example of their growing education of the market is through the use of discounts to increase marketplace force. By lowering prices smaller retail stores are able to bring in a larger market bases, and for a company that has a strong walk-in/sales ratio the increase in profits can be monumental helping boost stores to their highest potential. Another way retailers are able to afford their discount prices is by limiting discounts. A common sales tactic used by retailers is lowering the prices of complementary goods. For example on “Black Friday” big name retail stores will lower the prices of more expensive products such as video game consoles, however the stores will not alter the prices of accessories and games for the systems. As a result any profits lost through the discounted systems are made up through the newly increased sales of regularly priced complementary goods. The third and final reason stores can afford “low prices” is “baiting”, more often than not companies will advertise a first come first served sales tactic, this creates a sense of urgency causing customers to splurge on one sales trip rather than waiting to purchase their desired products. Through the use of this tactic there is both an increase in immediate sales and a long term increase in sales as more often than not the items will remain on discount long after black friday has passed. This helps clear out store space to bring in new goods for the retail stores next “big deal day”.
Work Cited
Goel, Nalin MBA. “How do online retailers make money despite giving huge discounts?” Quora, May 17, 2015
This was really interesting, I enjoyed some of the psychology behind the it. It makes sense that the prices of compliment goods are increased, because most people don't think about what else they are buying after that initial deal. Do you think this causes people to actually spend more money than they would regularly? As you said, the "first come first served" makes people buy whatever they can, because they might not get another chance. Those costs really add up for the consumers, and they will probably end up spending as much money on Black Friday as they would on a regular day (but with more goods, of course).
ReplyDeleteHow does this affect the economy? Is Black Friday helpful? If stores can afford this sale, I’m assuming that there is an increase in the store’s revenue as many people are buying Christmas gifts or are attracted to the sales and excitement of Black Friday. However, some of the costs of Black Friday may be that the stores have to pay their workers probably more and for a longer period of time. They also have electric and other costs from lengthening their store hours. Despite these costs, I can see how companies can afford it (through complementary goods, larger market base, etc). At this point, it may also do more harm than good if a company does not participate in Black Friday as many substitute goods at other companies may be on sale. Lastly, it may also help businesses (such as restaurants) around malls or other shopping centers with the increase in consumers flocking to get the sales.
ReplyDeleteAfter Black Friday shopping multiple times, I have never questioned this, for some reason I always thought it just happened. It was interesting to hear the three different ideas of discounting and how bigger companies can afford this but they are actually earning more. Although I feel manipulated by stores now, from a business perspective Black Friday is the best idea for their companies. Something that also benefits from Black Friday are the fast food restaurants that are open, more people are out late so they get hungrier and fast food places and gain some more customers that they normally wouldn’t get.
ReplyDeleteI thought that this was a really cool topic. I work at bestbuy and everything you mentioned in your post is actually what best buy does. Especially with what you said with some of the doorbuster deals. I’ve seen many “doorbuster” deals last for the next two or three weeks even though black friday deals should only be one weekend. Another thing that could be mentioned though is that as far as I’ve seen in the store I work at is that for black friday almost everything is discounted including most complimentary items. I’ve seen $60 video games go on sale for 20 and different things like that. Otherwise I think you did a really good job and I really enjoyed your post.
ReplyDeleteI think this is a really good topic, it's a topic that people don't think of when the time of black Friday comes around. During this time period, stores lower the prices enough to make sure they are still making profit. When the prices lower more people tend to buy it more than when the price was higher. So if the stores sell enough of the product they can receive more profit but it won't be maximizing the total cost of the product. The black Friday deal is a good deal for consumers because usually the prices of the products never drop this low except for this event. Overall, black Friday helps the stores and the consumers because they are still making profit and the consumers are getting the product they want for a cheaper price.
ReplyDeleteI think that like you said, many of us wonder how it's possible for companies to lower their prices so much, however this makes a lot of sense. People often go crazy over the amazing deals and feel the need to spend more money on goods that they wouldn't have bought otherwise. The stores are able to sell more products, and although it is at a lower price so they aren't making as much profit on each one, overall they profit more from the increase in customers.
ReplyDeleteI have always been curious over this topic, as a avid black Friday shopper. However, I think in addition to every thing you mentioned about where and how such low prices can be made, is because of collected clearance items, stores, specifically clothing ones, tend to keep popular items from earlier in the years, and sell the bulk of them at a lower price. These items usually were made in to big of bulk, and it's the best way of ridding them from the store. However, I wonder how the game will change this year, as it's been announced that this will be the first year that online shopping will over-take in-store shopping. And Black Friday is expected to change over the next couple of years, due to this.
ReplyDeleteYou brought up some good points on how's stores have to manage their money during sales like Black Friday. It’s really interesting to see how much stores take into consideration when planning sales and their strategies on how to save money. It makes sense that stores would only decrease the main item and keep the accessories at the same price. It’s a really good idea, because like you said, it increases demand.
ReplyDeleteThis is an interesting point. I don't go Black Friday shopping, I am more of a cyber Monday type of person. I have seen the crazy videos of people running other people over to get the things they want. I have also heard of a lot of stores selling out very quickly. I never thought about the planning involved. Black Friday like you said increases the demand because of the new lowered price. The supply also increases because stores are putting more things into their stores.
ReplyDeleteVery interesting topic! Great job making connections to how stores can afford to participate in Black Friday discounts. I don’t do Black Friday shopping, so it is interesting to read about the economical advantages and disadvantages. I can see how these sales can boost the demand and supply needs of a store during the chaotic time.
ReplyDeleteI would have loved to read about a connection between Black Friday and Cyber Monday sales and which cause more demand and supply needs for a business.
I know that Black Friday is a huge deal to some people-- sometimes an even more important tradition than thanksgivings--but I wonder if it will ever be replaced by electronic shopping. Cyber Monday is becoming more and more popular as companies are able to give even bigger discounts online and sell to a much broader audience that isn't too keen on stampeding through packed malls.
ReplyDeleteI’ve always wondered how stores are able to make Black Friday profitable, and this definitely explains that. I’m sure the foot traffic is also dramatically increased because of consumer expectations waiting for the prices to go down on Black Friday, rather than buying items a week or two before. However, I would like to know if consumers actually save any money when they buy items on Black Friday, since it was discovered that some stores raise prices beforehand and then slash them on Black Friday, making them the price they should have been.
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