Note that since I’m going to be discussing Black Friday, this post will be a little more US-centric than usual. I know things are a bit different elsewhere and most of this doesn’t apply to people outside of North America.
A few years ago I wrote a post explaining the mechanics behind Black Friday sales, where you get a stampede of aggressive consumers competing for goods on the day after Thanksgiving. I’ve been thinking about it a lot this month.
Apparently I’m not the only one. I got this email:
A number of years back you wrote a great post on “Why the Christmas Shopping Season is Worse Every Year”. One key point being that as much as retailers would love to start moving goods prior to Thanksgiving, we consumers just hate the idea and insist on waiting until after the turkey is stuffed.
Yet, reading through my inbox the past week and judging by commercials I’ve seen throughout the month of November, I’m getting the impression that maybe we have crossed a threshold. Many retailers are tossing out sales tag lines like “Black Friday all November” or “Pre-Black Friday Super Savings”. This was capped off by NewEgg.com sending me a promotional email this morning with the simple subject line: “Black Friday Starts Now!
Um NewEgg… it’s Monday…
So my question is: Do you think we have hit, and passed Peak Black Friday? Will the Friday after Thanksgiving become less and less of a sales focal point as more sales are driven earlier into the month of November? Will we be looking back in 10 to 15 years when all retailers start their sales on Nov 1, and laugh at the insanity of Midnight store openings on the Friday after the fourth Thursday in November?
The Mechanics of Black Friday
You can read the original post for the full context, but the short version goes like this:
The volume of goods purchased for Christmas is staggering. It literally exceeds the throughput capacity of even the largest stores. They can’t maintain enough warehouse / shipping / storage / floor space capacity to keep up with the demand.
As a result, stores want to spread those sales out as much as possible. However, American consumers won’t tolerate Christmas stuff appearing before Thanksgiving. Retailers need to take the 4-6 months worth of retail sales and fit them in the four-week window between Thanksgiving and Christmas.
This creates a winner-take-all scenario where everyone fights over the day after Thanksgiving. (Black Friday.) In turn, this creates the reviled and unsightly stampede. Retailers have to participate because they can’t afford to get stuck with all of these goods. Consumers feel compelled to chase these deals because it’s the best way to make use of their money. Sure, you can skip Black Friday if you want. But then you’ll pay possibly hundreds of dollars more.
So we have a holiday dedicated to showing gratitude for what we have and celebrating family, and then the next morning we get up dawn so we can fight a mob of strangers for deals on a new Nintendo. Everyone hates this. It looks crass and stupid. It creates stress. It results in danger and damaged goods. Everyone is trapped because the only way to escape this situation is to make deliberate financial sacrifices. Either retailers pass on the most lucrative season of the year, or consumers choose to pay more for the same goods.
Like I said back in 2014, it gets a little worse every year and until now nobody knew how to stop it.
But now it looks like a shift is happening. As the person above observed, online retailers are starting their sales on the Monday before Thanksgiving. Nobody seems to be mad about this. Apparently the objection to Christmas shopping before Thanksgiving was purely aesthetic. Consumers don’t like seeing Christmas decorations this early in the year, but they’re perfectly willing to do their Christmas shopping online.
For brick-and-mortar retail outfits, this is terrible news. Anything that cuts into their sales between Thanksgiving and Christmas is going to have a brutal impact on their bottom line. Like I said in the earlier post, this sales period is when they move a third or even a half of their total sales for the year. Losing that business to online outfits is going to hurt. If a retail chain is having trouble staying afloat, this might be enough to push them into insolvency.
For the rest of us, this is great news. This needed to happen. Now that the start of Christmas shopping has moved past the Thanksgiving roadblock, it can move around until it reaches some sort of equilibrium. If we can spread those 4 weeks of extreme volume shopping over a couple of months, then that will cure a lot of the throughput problems I talked about before. Previously, the system was heavily in favor of whoever could best take advantage of huge economies of scale. The outfit with the best throughput wins. If you’ve got gargantuan warehouses, a huge fleet of delivery vehicles, spacious on-site storage, and lots of floor space, then you can more easily ramp up to meet the extreme demand. Which means the Black Friday system favored big-box stores like Wal-Mart and Target and was harder on small businesses. In this new system, it’s just as easy to shop at some rando Etsy store as it is to shop at Amazon.
This new system will be more efficient, as well. Previously:
- Goods go from warehouse to the retail space and are unloaded.
- Goods are moved to shelves.
- I go out in my car and drive to six different stores looking for what I want. I have to fight against heavy traffic and frustrating crowds. I have to drive around for ages looking for parking. If I’m in the north, then I might have to do this while the weather is bad, which will make everything that much harder.
- The crowds make people feel stressed, which adds to the human cost of the whole thing. More fights, more shoving, more damaged goods, more time squandered standing in line, more people stopping to eat junk food they would otherwise avoid.
- Because of the physical hassle, I might not get the best deal. I know personally that after an hour of battle royale with other shoppers I stop worrying about quality and price because I just want to escape the chaos.
- I gather up the goods, standing in line for age, and then haul everything home.
Under this new system:
- I browse online for exactly the stuff I want, and I can use price aggregators to help me find the best deals.
- Goods go directly from the warehouse to to my house.
This system gets consumers better prices, eats less of their time, inflicts less stress, and burns less fuel. Sure, those UPS delivery trucks burn a lot of gas, but I’m sure it’s nothing compared to the energy expended in step #3 above. We’ve eliminated the middle staging area between the warehouse and my house. Yes, there are package-processing places between those two points, but goods are still taking a far more direct route.
I don’t think the transition is done yet. I’m sure the bulk of the shopping still takes place post-Thanksgiving. But the dam has broken and I suspect it’s only a matter of time. As consumers discover the joy of shopping online, behavior will shift. I’m sure lots of people will continue to do things the traditional way, but online shopping can act as a safety valve for all those people who don’t want to participate in the madness.
So that’s good news. Happy Thanksgiving everyone.
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