It’s called Black Friday because the sales from that day/weekend traditionally made the company go from the red financially to the black (I.e. profits). Now that it has extended out to a month it’s still a scam. If you have to drop your prices to a deep discount to be profitable, perhaps you’re charging too much throughout the year. Why is Walmart so far and away the largest retailer in history (twice that of Amazon who is second)? Because the model they chose was profits by volume. Sell it for as low as you can and make your profit through high volume. I fully understand and am aware that profitability can be determined by a multitude of factors, however, none of which are more important than the sales of your goods/services. My point is two-fold: 1) if the means by which your business is profitable is to offer a discount what does that tell you and 2) Nobody even comes remotely close the annual revenue that Walmart does every single year. I know Walmart does BF each year too but they have to because their competitors do it too and it’s a way to get people into their stores. They often lose money on most of those big ticket items. I just never understood or cared about Black Friday. Am I the only one who’s over it now. I mean I was receiving Black Friday sales notices before November even started. Halloween wasn’t even over before many online retailers were offering sales calling them early Black Friday deals.
A lot of people like deals. Black Friday isn't going anywhere. And yes prices just inflated all year long. Look at profit of some of these retailers in the last few years. And those that mfg the products.
Black Friday is just a tradition. Business do make a very strong profit based on the sales from the tradition. Prices are meaningless they provide a fictional value. Cost is different from value. You pay for the latter to whay ever the company sets
Happy Thanksgiving. My 0.02 as an ex Nestle employee and current PM at a data vendor servicing f500 firms running eCommerce business. "Dropping your prices to be profitable" isn't a thing. Margin is on a per item basis so you are actually less profitable by dropping your prices. There are a whole host of costs involved with an eCommerce business. Inventory costs, minimum order quantities, retail media/ad spend, shipping, storage, the list goes on. That said, brands still do sales because it helps with brand awareness during promotional events. Marketing 101 is all about the funnel (Awareness, engagement, consideration, conversion). Retailers work with brands to offer greater awareness/engagement at the top of the funnel with better placements on a search results page and better visibility overall. This is why brands pay retailers for ad placements. Brands actually advertise year round. There is an entire promotional calendar at most firms targeting different events. Halloween and BFCM are the obvious ones but if you pay attention you'll see sales during Christmas/new years, valentines, Chinese/lunar new year, memorial/labor day, etc. They just don't do as deep of a discount, nor do they do it on as many products so you don't notice it as much. There are also many complex advertising strategies (e.g. Samsung paying for ad spots on an iPhone page) that are strategically deployed to target specific launch dates. But advertising everything 24/7 would erode brand equity, which is the worst thing you could do to an eCommerce business. Lastly, don't confuse revenue with profitability. Walmart may have insane revenues, but I can almost guarantee you it's not because of running discounts. They've been chasing Amazon for the last decade in advertising technology and running a retail media network. Advertising is where the profit is, not retail. Walmart does have the leg up in grocery delivery (via instacart which is usually more expensive), and has a physical presence to capture in person shoppers. From the brand perspective, Amazon is by far the largest business by several orders of magnitude. It's a 1B business at Nestle, walmart is lucky to be 10% of that. Source: been in eCommerce for awhile now and have seen the PNLs. P.S. If anyone at Amazon is hiring please hook me up lol
"Dropping your prices to be profitable isn't a thing" Me wondering why my professors told me differently when getting my econ degree 🤔 Lowering price can indeed increase overall profit. That's the foundation of economics and pricing. There is an 'ideal price' and pricing above that loses the company money. Giving discounts also allows companies to price discriminate, allowing a better capture of value. Pricing also affects customer perspective, so companies can't freely assign a low price if the product is giffen-good-like. Black Friday allows for a "never before seen sale", allowing the capture of the lower part of the demand curve without really losing brand value. And of course as you point out, raising brand awareness is a massive part of it as well
On the first point, it's a yes and no kinda thing but I was referring to per item profit. Assuming the increased volume makes up for it then yes, overall you would be more profitable. It's a double edged sword though because if customers now expect you to drop prices and won't buy until you do so.. Goodbye profitability lol
Black Friday is more about the mentality it creates for consumers. They _think_ these are great deals and start buying things they would not have otherwise. Only compulsive shoppers do this year-round.
Ding ding ding 🛎️ this is the right answer. It’s all about creating artificial urgency in the consumer’s mind. The oldest marketing trick out there, this is just one of its manifestations
It’s a self fulfilling prophecy. The “deals” truly are now
The “in the black” vs. “in the red” thing is mythology from the 1980s: https://www.dictionary.com/e/black-friday/
I didn’t know that reason for Black Friday. Very interesting!
it’s not. it’s a backronym. google it if you care
big brain
I've heard the whole "finally going profitable that day" thing is a myth. Rather, the revenue for the first nearly 11 months of the year covers the cost of doing business over the entire year. A good business should be profitable over the course of the entire year.
Question, assuming that is true, why drop prices? Do the stores get the products at a discount for the holidays? I think mostly not. So if by dropping your retail prices gets people in the door and buying like crazy, then does it stand to reason that you’re charging too much to begin with? ¯\_(ツ)_/¯
People like to feel that they are at the better end of the bargain. Even if the stores keep the prices as low as possible ,people would still prefer a sale or a discount or door busters or what ever makes them feel that they had a great bargain.
What we need are those Black Friday door buster fights back.
Door buster sales on mace and doors!