I understand that this blog is a little bit late. I probably should have had this out in time for Thanksgiving. However, writing it as a retrospective can still work, I suppose, and I feel like this is one of those marketing topics that it’s high time I gave my opinion on. There are plenty of people who would universally condemn the sales and the materialism that they encourage, but from a certain perspective, I think that these sales are a response to the competitive materialism which is the hallmark of the secular Christmas that is known by the cryptic name of “Holidays.” From that perspective, and from a financial perspective, these sales are simply brilliant examples of marketing.
I have never worked in retail, so I couldn’t tell you exactly how a Black Friday sale works. However, I have been working at RevBuilders long enough that I think I could venture a few guesses at the intentions of the people who set up the sales. Essentially, it all just comes down to getting awareness about the business raised, getting people excited to go, and making money off of them when they arrive. That’s the essential goal of any marketing campaign, and Black Friday and Cyber Monday sales do an exceptional job of accomplishing this goal. Why are they so effective, though? I have some guesses.
It’s the day after Thanksgiving, which means that, no matter what year it is, Christmas is less than 35 days away. In America, where the majority of households exchange gifts on or around the Christmas holiday, this proximity means that gift shopping is on the forefront of their minds. Likewise, many people are a little stressed out about the expense that holiday gift shopping now accrues (as though you can only have a Merry Christmas by spending thousands of dollars). As a result, the idea of going shopping on a specific day to get great deals is extremely attractive to them. So the marketing group just has to say “Black Friday Sale!” in the advertising and they have a big chunk of attention from the general population. Let’s drill deeper.
The “Doorbuster” Deal
Think about it: There are literally thousands of businesses out there. While there are substantially fewer businesses that could be considered big retail corporations, the truth remains that literally everybody that sells products rather than services (and many that sell services, too), wants a piece of the Christmas shopping pie. Why? Because it’s a really big pie! 2012 Black Friday revenues were nearly $60 billion this year, according to the estimates of the National Retail Federation. That’s in one weekend. So, how do we get a piece of that pie, when everybody is doing sales? We do bigger, better, meaner sales. We come up with a way to get people in the door so that we can sell to them. There needs to be a sense of urgency so that people shop at our store and shop there first. The solution? Sell a limited amount of stock at the lowest price you can possibly manage, so that only your first several shoppers benefit from the, “Best Deal in Town.” This awakens competitive notions in the people who want to shop, and actually enables most businesses to sell some pretty premium stuff as a loss leader. Why? Simple:
They’re In Your Store
If you have customers in your store and they came there for the big doorbuster deal, the best way to make back the money that you may have lost on the loss leader is to simply mark up (or not put on sale) some of the other items in your store. There’s a pretty good chance, after all, that once you have customers in your store, they will pay for more than just whatever it was you put on sale. They understand the competitive nature of doorbuster deals at least as much as the people who put them on, and will therefore only rely on the “sure” deals anywhere other than the first place they shop. This means they are highly likely to get everything they need within a certain niche (such as office equipment) at one or two places. This is how you can sell a TV at a loss: You know that you’re going to probably make a ton of money on remote controls.
Am I way off base? Or is this exactly what a company does in order to get people in the doors on Black Friday? What do you think?