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Black Friday

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FlyingAxe Posted: Wed, Nov 21 2012 3:02 PM

Can someone explain to me, please, what happens on Black Friday from economic point of view, and why it happens? I mean, yes, I know: stores lower prices, and as a result, the consumers stampede. But why does this happen?

To me it seems like US retailers and customers role-playing in USSR for one day a year.

Why is it profitable for the businesses to do it (and if it is profitable, why not do it more often)? If it's the need to clear the shelves of old or badly received products, why not do it the normal way: by lowering prices throughout the year? What's the special advantage of doing something like this one day out of the year (or two days)?

Also: how, if at all, is the government to blame? I saw someone claiming in the "Black Friday mess" thread that the government stimulates overproduction, which leads to necessity to offload the overproduced items. It's not really clear to me: doesn't the government stimulate overproduction in capital businesses, and even if that claim were true, why do this only once a year?

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Anenome replied on Wed, Nov 21 2012 3:44 PM

I think it's just that it's the most convenient shopping weekend prior to Christmas because for most people it's a three-day weekened due to Thanksgiving, when most stores are closed.

That lead to consumers all going out that day, generally, and then stores began to cater to that demand, making it self-reinforcing.

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And every year I try to keep a running tally of how many violent incidents/deaths occur because of this tradition. The deals aren't even THAT good considering you have to camp outside the stores or get there at like 4:00 a.m. for a good place in line and then you have to contend with the random acts of violence that occur!

Here's an article that explains some of the darker side of Black Friday.

They've also got "Cyber Monday" and "Green Tuesday" as well as PRE-Black Friday sales that they're starting to push. Sheesh!

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I think, but am not sure that centralized statist trade policies have something to do with it.

There may be tax deductions for it and the police know when to expect the most chaotic shopping days.

I think this is a good topic to research: )

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Competition </thread>

Retailers reduce prices to compete with each other. It is not necessarily profitable, but it may mean that they are not stuck with a bunch of inventory at the end of the year.*

*This is something that is really difficult to understand because it is purely human action at work. That is, each retailer has its own reasons for doing what it does and we can only truely guess at to why it would reduce prices.

 

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I was thinking about Black Friday yesterday when I noticed a huge increase in cars parked in the lot at the local plaza. At its basis, I suppose that the anticipated drop in prices increases interest level among potential consumers, which in turn (due to empirical evidence from years past) inspires increased production and increased spending. Volume selling seems to account for the increased profit margin. So I'm also curious about something: since an increase in consumption is accurately predicted, couldn't the stores inflate prices? I suppose that since they don't inflate the prices, the people are essentially purchasing the product more due to price level than the function of the product itself, right? This is how I see it, feel free to offer any insight; I think Black Friday is fascinating.

As for the tie to government's blame, no, I don't see the government being at fault for anything regarding Black Friday. Since the government has no money of its own (or, more specifically, since it produces no wealth [profit] by its own means but instead steals it through taxation), the best it could do is not interfere with the private sector at all. In this case, I see the prices as fueling the influx of the masses, and they are competitively trying to obtain limited products. If they were unlimited, there would be no rush; and if the space were not confining, there would be no trampelling. This is mainly a failure of logistics and certainly not government.  

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Anenome replied on Fri, Nov 23 2012 2:36 AM

I think the huge deals are limited, say 50 tvs at 75% off or w/e. It creates a mania, and even those who don't spend the time trying to hook those deals are still drawn in by the lesser deals they expect from it being a volume day.

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