What is the Deal with Black Friday?
So you might go to the mall on the fourth Friday of November looking for deals and start to question why these companies and stories actually make these promotions. It is completely logical to think that they would make less money by giving more discounts. I mean, that’s how I always thought of it. Actually, the whole deal with Black Friday is to exploit cultural mainstreams to make more money than usual.
For some fun though, here is some background on Black Friday that may bring to light some of the dark secrets of this “great” day. Black Friday originated in Philadelphia- some point between the 1950s and the 1960s when the Philly Police Department tried to persuade people to not join in on the massive holiday shopping after Thanksgiving. Stuff was much more unorganized and rambunctious back then: massive amounts of people flooded buildings looking for the best deals, causing a great amount of commotion. These policemen eventually got fed up with the chaos they could not control and tried to connect the word “black” with “don’t do this because black is equal to evil.” Let us just say that it didn’t work, and it’s pretty evident that it didn’t.
So back to the economics part. You are actually right about some companies and stores losing money on products, but that is not the main perspective they are coming from. If you really pay attention to what they put on sale, you may have noticed that the sale is on a select number of products. It could be technology if you go to Best Buy, or it might be diapers at the diaper store next door (that rhymed). But when massive amounts of people come in and think they are saving tons of money on other things, they buy more and more, things they didn’t intentionally come to buy.
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That is one of the larger parts of why companies actually conduct these large sales: people buy lots of other things they actually didn’t come in for that aren’t marked down and end up spending more.
Surely that can’t be the only reason right? Well, you are right again (wow, you are good at this). This may make you a bit mad, but many times, companies will put out budget products and stocked up inventories/non-selling items to make it seem as though what you are buying is an absolute steal. Really, you are helping to eliminate one of the two most dreaded things any business can have: a full inventory of worthless retail items and low quality products. You didn’t really think they would give up some of their profits for you, right?
Perhaps the coolest reason why they make more profit is that, since people flock to get these “outrageous” deals, producers can order the manufacturer to only produce that good and nothing else. What does this mean? Well, it means that the production costs go down by a large margin: producers can dedicate all of their resources to producing one good, coordinate more efficiently, and ship in massive bulks of items.
When you don’t have to produce multiple goods, you save time and money by streamlining your process into one aspect that you can do most efficiently, rather than produce many different products you might not be able to produce as efficiently as the one the companies ask for in bulk. What happens then? The companies that buy from wholesale, or the manufacturer, receive a reduced price which they translate to the customers and themselves.
Kendrick Lamar’s description of Black Friday is the best:
“Money trees is the perfect place for shade. That’s just how I fell.”