The Economics Behind Black Friday


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    With the rise of consumer culture in the 21st century, it has become blatantly obvious that Black Friday has changed from one day full of sales to practically an entire month full of savings. However, the day itself is a high point in the year for consumers.
      According to Eric Mayefsky, a Ph.D. in economics from Stanford, having large sales obviously can cause companies to lose money. I think we can all agree that selling something at a reduced price means less money for the store. However, in the case of Black Friday, the single day during the year that is practically meant for consumers to spend money, stores actually make more money. Another way that companies also trick consumers is through the lure of extended warranties. While a warranty makes sense for items such as a car, for other items, it is not usually necessary for other items.
     Additionally, pulling away from the actual amount of sales made on Black Friday, for many families, Black Friday is often viewed as a family tradition. Families are going out to shop simply because it is Black Friday. Obviously, with the advent of online shopping, Black Friday sales have spread online and even to weeks in advance of the big day. But what's interesting is people still go out to stores to shop. Consumers gain utility when they drive out of their way to go to the nearest mall and stores have taken advantage of that.
     Not to mention, Black Friday has a huge effect on the economy. About 68% of the US economy is made up of consumer spending. Black Friday in a way initiates the spree of holiday shopping that occurs right before Christmas. Black Friday stands as a symbol for the extremely consumer-driven culture of the United States, but it also is a crucial part of our economy.
SOURCE
https://www.forbes.com/sites/quora/2013/11/27/what-are-the-economics-behind-the-black-friday-sales/
https://www.latimes.com/business/la-fi-black-friday-retail-economy-20181123-story.html



Comments

  1. KevinFebruary 9, 2019 at 1:43 PM

    After reading this post, I thought of the opportunity costs of Black Friday. Instead of pushing through crowds or staying up late to go shopping, people could stay at home and instead save their money for some other time. Although the sales are enticing, there is a whole lot of stress and chaos in stores during this time period. Because online shopping has significantly increased, people are more likely to stay home. It is also interesting to see that when people are pressured to go shopping, they could instead completely stay away, a situation that psychologists call reactance.
    https://www.usatoday.com/story/money/2018/11/23/black-friday-no-go-shoppers-sick-ads-crowds-shopping/2088399002/

    ReplyDelete
    Replies
    1. AnonymousFebruary 10, 2019 at 11:55 PM

      Your point about the opportunity cost of Black Friday made me want to look into how online sales would play a factor in people's participation in Black Friday. I found that far more sales were made online and the number of sales made in stores had declined. This to me signified the shift away from physical shopping historically associated with Black Friday, and could effectively negate the opportunity cost of participation. If the vast majority of consumers decide to simply purchase online, they would not have any problems with the stress and chaos of physical shopping. I think that this trend could lead to an increase in participation in Black Friday, as the opportunity cost of going into a store to shop has been greatly decreased in recent times.
      Source: https://www.businessinsider.com/black-friday-online-shoppers-outnumbered-in-store-2018-11

      Delete
  2. AnonymousFebruary 9, 2019 at 9:18 PM

    The idea that Black Friday is a great way more stores to make more money, as indicated through your article, makes a lot of sense to me. In addition, I found topic of tradition of families shopping on Black Friday really interesting. Upon further research I discovered a couple other traditions that families keep when going Black Friday shopping. For example, they usually go to the same store first. In the economic perspective, this traditional way of shopping could benefit some stores that have been around more than others as they are more ingrained in people's traditional ways of shopping on Black Friday as compared to newer stores that people don't usually go to each year. In addition, people usually travel to a far away, or larger mall. This means that is not the local, small businesses that are benefitting the most, it is the large corporate ones that are most likely found in those mega malls.
    Source: https://bestblackfriday.com/user-guide/family-traditions

    ReplyDelete
  3. AnonymousFebruary 9, 2019 at 10:43 PM

    Black Friday reminds me of similar shopping days in other countries around the world, such as China. On November 11th, when the online mall refers this day as Double 11, people buy a lot of things online from Tianmao (Tmall) or Taobao and this day is considered as the Chinese Biggest Shopping Day. Retailers were having big promotions on their products and because of this big sell, they were able to achieve their sale goal in the third quarter. You may wonder how they earn their revenue by selling their products in such a low price? In reality, most of the products' actual cost are lower than what people expected, so when the online retailers sell their products in the big promotion. They were still able to make money out of this. In addition, according to China Internet Watch, in 2018 Double 11, "Tmall Global provides 3,700 categories of imported goods from 75 countries and regions on its platform." I think this biggest annual online sell also increases the product flow in the international market and promote the international trade. (Source: https://www.chinainternetwatch.com/27359/tmall-double-11-2018/)

    ReplyDelete
  4. Anny T.February 9, 2019 at 11:58 PM

    It is very interesting how Black Friday works to me, now that you point it out. Typically, one would say that lowering the price of their products for sale purposes is a way to lose profit, however Black Friday sales actually accumulate the highest gross profits of the year. In 2016, there were 101.7 million people who went shopping and hundreds of billions of dollars were made. It is the mass number of people that entices business to participate in Black Friday sales. The benefit of having the huge number of sales overpowers the money that could be made through individual sales (opportunity cost). However, like many of the comments above mentioned, online sales have been a growing fashion and people aren't as likely to battle the crowds nowadays with the bustling nature of online shopping-- which in the end only benefits the larger companies because those companies are well known and have an online basis whereas smaller mom and pop shops aren't able to compete without fame.
    (https://www.thebalance.com/what-is-black-friday-3305710)

    ReplyDelete
  5. AnonymousFebruary 13, 2019 at 12:04 PM

    A reason that Black Friday is so successful I think is because of their lowered prices. With people seeing all the "50% OFF" and other discount signs, it draws people in to grab the deal while they can. This increases the sales of companies; increasing their profits. It is also has the "tradition" stigma around it, causing more people to want to be a part of. The talk and hype around Black Friday attract more and more people to participate and join the frenzy.

    There are other's that warn about Black Friday. NBC news explains how, "14 percent of the items “offered no savings” — had the same price or were more expensive when compared with their pre-Black Friday prices." While this number isn't particularly high, it is important to do your homework before you go- to be aware of any possible traps!

    Sources:
    https://www.nbcnews.com/business/consumer/black-friday-how-cut-through-hype-save-money-n938896

    ReplyDelete
  6. AnonymousFebruary 14, 2019 at 12:58 PM

    Thanks for the post! After looking through the comments, I was really interested in the online aspect of Black Friday. While Black Friday used to be in-store deals only, stores are becoming increasingly aware that another market awaits online. As I researched Black Friday vs Cyber Monday's online sales, I came across Alibaba's Singles Day, a sort of Amazon Prime Day. The company is based in China and that single sale grosses nearly quadruple what Cyber Monday does. Alibaba is a multinational conglomerate company with an emphasis on online retail. Singles Day grossed $30.8 billion (GMV) whereas Cyber Monday made $7.9 billion, and Black Friday at $6.2. In just the first minute and 25 seconds, sales hit $1 billion. Singles Day also falls in November. The event is huge; Mariah Carey even performed to kick off the gala before the sales began.
    I thought it was interesting that this foreign Black Friday was so successful yet virtually unreported in US news.

    Sources:
    https://www.businessinsider.com/black-friday-cyber-monday-vs-singles-day-sales-2018-12
    https://www.cnet.com/how-to/black-friday-2018-vs-cyber-monday-whats-the-difference/
    https://www.cnbc.com/2018/11/11/alibaba-singles-day-2018-record-sales-on-largest-shopping-event-day.html

    ReplyDelete
  7. AnonymousFebruary 15, 2019 at 11:11 AM

    Black Friday is a very interesting example of how marketing affects the way consumers think about buying things and spending their money. When we see sale signs we justify shopping sprees because we feel that we are "saving" money when in reality, we're still spending money and oftentimes end up buying much more than we normally would and therefore spending more than usual. I think that people could benefit much more from black Friday if they do some planning by figuring out what they actually need to buy and just focusing on those items. With no plan, people do much more impulse buying as they are caught up in all the sale signs. Overall, black Friday is marketed incredibly well, which is why it ends up making stores more money, even with the reduced prices.

    ReplyDelete
  8. AnonymousFebruary 16, 2019 at 9:31 AM

    I thought it's interesting that stores make a lot of money on Black Friday even though they're selling their products for less. Black Friday is a way for stores to make money because even with the sales leading to less profit per unit, there are much more units sold. Because products often have a large profit margin even with sales and price reductions, and the demand for these profitable products goes up on Black Friday, stores are able to make a lot of money off of it. An interesting article I found states that it costs Nike around $30 to make an ship a pair of $100 (with sale shoes). This shows that even when companies put their products on sale, their profit margin is still huge, and since they're selling a lot more of these products on Black Friday, they're making a lot of money.

    https://www.chron.com/business/article/This-is-how-much-it-costs-Nike-to-make-a-pair-of-5964040.php

    ReplyDelete

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