.comment-link {margin-left:.6em;}

Wednesday, November 23, 2005

Black Friday = Economic insanity?

The day after Thanksgiving, a.k.a. Black Friday for retailers, is insanity for those shopping and for those working. It’s literally impossible to find any information about why this day became so important to shoppers. Yes it does kick off the Christmas season, but that shouldn’t equal early morning sales. By early I mean 5am doors open and shoppers are lined up to get inside!
The thing I don’t get it is how can the market support this day. One would think that it’s too big of a sudden flux in consumer wants. The demand is so HIGH, but the price demanded is so LOW. Companies are willing to drop prices but the also limit the quantity as to not lose money, but I would think that you would still lose money unless you offered a bigger quantity. Especially because customers have other places to be and if u don’t have it, they leave and go somewhere else. Plus most of the people who are willing to brave the sales know which place has the better deals and more to offer, and will avoid the places they normally shop at cause they don’t offer good enough deals. It’s the one-day in the whole year were sales SPIKE and then the day after they calm back down. You might see a slight pick up in sales, but nothing compared to that day.
Would this sudden spike in demand be considered deflation because prices tend to fall to meet the demand? It’s a sudden drop, but tends to recover in the next few days. As of late companies have been using "Black Friday" as a starting off point for their holiday "price cuts" Obviously not as dramatic as "Black Friday", but still pretty decent price cuts to get more people shopping.
What I would like to know is how did this come about? How could the market have created such a frenzy on one day and had the ability to sustain it for several years to come? Plus who even thought of it? Let alone know what kind of supply would be needed in order to meet the demand of the consumers?
The only information I could find on Black Friday was that its called black Friday because it is the day when retailers traditionally get back "in the black" after operating "in the red" for the previous months, often by cutting prices considerably. That site also talks about how Black Friday is normally the busiest shopping day, but not typically the day with the highest sales volume.
Companies have become so secretive about their Black Friday ad’s that other companies have a job to just try and "sneak" out the deals being offered. Several companies, including Walmart and Best Buy, this year had their ad posted online. Those ads are now being recalled and new ones printed. Best Buy is currently suing the employee who took the ad and the online site that posted it. Best Buy claims that "It’s a loss of sales to have people comparing prices before hand. We can’t price match on this day because we would suffer too many loses." Unlike Walmart who will be price matching any competitors price. Its become such a huge price war that the lowest price is the sometimes below the purchasing price of the company in the first place. How can that be good business? Especially if its not typically a high sales day?

Comments:
"What I would like to know is how did this come about? How could the market have created such a frenzy on one day and had the ability to sustain it for several years to come? Plus who even thought of it?"

Perhaps you have missed an opportunity to point to and explain Hayek's "spontaneous order."
 
Post a Comment

Links to this post:

Create a Link



<< Home

This page is powered by Blogger. Isn't yours?