Long but
please read!
It sickens
me to hear and see what is happening in the US with regards to the Black Friday
sales. Large corporate retailers need to take responsibility and fix all that
is fundamentally wrong with this type of marketing. Here is what is
fundamentally wrong with the Black Friday shopping even in America:
For some
time now, roughly since 2005 but more so since the economic downturn in 2008,
retailers have been looking at ways to get consumers to spend. Since 2008
consumers in the user have been counting pennies more than ever and as such
they start looking for deals on their purchases. I clear example of this is the
couponing craze that became really big in 2010.
Immediately
retailers started putting on sales to entice consumers to buy more. However
retailers were also suffering losses to their bottom lines due to this
downturn. Putting on sales may mean more customers but it also means narrower
margins. Along with the price of oil, consumer products started to rise in
price. Retailers struck deals with manufacturers to produce identical products
but with unique model numbers for individual retailers; this eliminated price comparisons.
At the same time they asked for the
manufacturers to increase the MSRP by as much as 50%.
The common
assumption is that retailers stock up on goods and then mark down the ones that
don't sell, taking a hit to their profits. But that isn't typically how it
plays out. Instead, big retailers work backward with their suppliers to set
starting prices that, after all the markdowns, will yield the profit margins
they want.
The red
cardigan sweater with the ruffled neck on sale for more than 40% off at $39.99
was never meant to sell at its $68 starting price. It was designed with the
discount built in.
To simplify
this let’s look at this example: The MSRP on a widget is $100. After the
retailers asked the manufacturers to increase it by 50%, the MSRP is now $150. Previously
when the retailer put the item on sale for 50% off the price would have dropped
down $50. Now when it goes on sale for 50% off it is $75 (50% more than what it
was previously on sale for). The retailer has now made or saved 50% more on the
sale and this goes to their bottom line.
Now that the
pricing structure has been solved the next issue is how to get customers to
buy. The retailers understand that when items aren’t on sale people won’t buy
and the cost of doing business is calculated as such. Retailers started to look
for a period when they could capture the most customers. That period is the day
after Thanksgiving when a large majority of the nation has the day off.
Advertising
is one of the largest overheads for retailers. Being able to target up to 80%
of your marketing budget to one single day is highly cost effective and
rewarding. Also in 2013 this is very important. Consumers are more aware than
ever to the true costs of goods, thanks mostly to social networking. In an
effort to counter act the effects of this retailers use basically bait and
switch tactics to get people to their stores. Examples of a $3000 TV for $800
(limit 1 per store) or designer jeans for $20 limited quantities. These tactics
get people into the store and the assumption is that the cost of basically
giving away a TV is recouped by the fact that the unlucky customer will feed of
the frenzy and feel compelled to make a purchase anyway. After all most of the
consumers are shopping for gifts for the holidays.
Now when you
take this formula for sales and marketing and add it up, what do you get? You
get a large population in a recession that is desperate to save a penny and
have the opportunity to provide for their families during the holidays.
Families and individuals save all year for this event and they are desperate to
maximize the value for money.
Most people
can’t afford a $3000 TV but a whole lot of people can save up $800 over the
year and take a chance on getting that one TV per store. You see the same thing
with toy companies peddling their wares in short supply at the holidays. And with
the social pressure on kids these days, parents feel the need to deliver on the
“best” toys of the season.
So now you
have a large portion of the populous trying to get the best value for money,
and a large group of parents trying to deliver the toys their kids “need” to
maintain social status. The result? Very large mobs of thousands of people all trying
to be the first through the door to get a chance at that TV, pair of jeans, or
toy.
By the very
nature of mob psychology, people get caught up in the frenzy and it becomes
every person for themselves. People get trampled
and crushed; fights break out over the last item; people fear for their lives
and pepper spray comes out; people become selfish and motivated and the pepper
spray comes out. It’s bad. It is also the same way that riots get started.
This is not
how civilized humans should treat each other. Retailers need to take
responsibility for this. How much profit do they need? The fact that people are losing their lives is all the proof I need to know that this has to change. It is sick. I am sick to my stomach that I participated in this, albeit online, but nevertheless.
I don’t know
what the right answer is but I am open to listen and will join any movement to
fix all that is fundamentally wrong with shopping events like Black Friday
sales.
- - N
