11/27/2015

The Myth of Black Friday

I read Where You Definitely Don't Want To Be On Black Friday -- The Mall because today is Black Friday. The article was wrote two years ago, but it really made me wonder if participating in Black Friday is the right decision. I still participated in the Black Friday madness last night, and according to a recent survey over 30 million people said they would shop on Thanksgiving day. As long as consumers create a demand for products store will continue to feed the frenzy. Stores create the frenzy by offering a few products for extremely low prices. They try to create offerings that will get you in their store, and hope you open up your wallets when you get in their store. Last night, my wife and I went to Target. Once we got what we were looking for we got in line. We had to wait quite some time in line. Target made the lines go up and down different isles. By the time we got to the register to check out, my wife had added at least five random items to our cart. 

I've never been one to participate in Black Friday, and I don't pay close enough attention to prices to know if there are better deals available. The author states that that consumers should enjoy the family time that comes with Thanksgiving, because the there are always deals before Black Friday as well as after Black Friday. If consumers are not spending much money early in their Christmas shopping, businesses will slash prices even more to give them an incentive to buy items.
 


3 comments:

Dr. Tufte said...

JordanJ: 82/100 (the article was "written" not "wrote"; you also have a problem with singulars and plurals in "... consumers create a demand for products store will continue ..."; and you needed to edit this phrase "... because the there are always ..." better).

It's kind of funny that Jordan brought up how Target managed its lines. In my face-to-face principles class this semester, that has been an example that resonated a lot with students. There are 4 types of market structure, and while there's a tendency for students to think that a business must be exactly one, in practice any business has dimensions in which two or more may operate. In this case, when you are stuck in the line at Target, do they have some monopoly power over you? Think about it: the only place you can buy that candy bar, or magazine, or drink, or grill lighter at that time is at the checker in front of you. Retailers recognize this and often charge a bigger markup for those items (if you've never noticed, the Wal-Mart in Cedar City sells the same candy at different prices in different parts of the store).

Jake Eliason said...

Millions of turkey riddled people tromping through stores glaring at ads can be overwhelming.

Last year I went out to battle the crowds and land some good deals on tools that rarely go on sale. My wife went with me, and like Jordan’s experience, we had extra stuff in the cart we never intended on buying. I think the power stores get from simply putting items next to you while you are checking out is great for business, but unfortunate for my bank account.

I have seen the effect not only on Black Friday, but in typically shopping trips as well. My daughter loves to grab candy and start munching as I am unloading the shopping cart onto the conveyor belt. This means I usually end up buying a candy bar or a bag of M&M’s, after I told her no in previous isles in the store.

Dave Tufte said...

Oh crap ... my comment disappeared into the ether. If it shows up, I may have two of theses showing.

*******************************

Jake Eliason: 44/50 (I think you meant "typical shopping trips", and "aisles").

This actually relates back to what we covered about consumer surplus.

Actually estimating what a demand curve looks like is a doable thing, but you need more econometrics than MBA students get at SUU (I have done it occasionally with my face-to-face classes).

Anyway, once you can plot that precisely on a graph — instead of just throwing up a curve on some diagram on the board — you can measure the areas under the demand curve. When you do this, consumer surplus is an actual dollar measure of what you would have spent but didn't have to.

The perfect analogy for this is going to the store with a list, expecting to spend $150, and maybe bringing $200 in cash with you just in case. It's not clear from that example how much consumer surplus you'd get if you bought only stuff on the list and paid $150 for it (the consumer surplus is there, but I haven't given you enough information to figure it out, so call it X). So you'd walk out with $50 in cash, plus X in consumer surplus. But, if you go and find that some items are on sale, and you only spend $140, we know precisely that you walked away with consumer surplus of X+10 dollars, because the additional $10 out of the $60 you walk out with is definitely surplus.

But, most of us don't do that, do we? Instead, we buy stuff that's not on the list, and can't find items that are on the list — and we'd need to figure out how that changes our measure of X. It's still possible that we'd walk out with $10 we didn't expect to have, but often we buy something extra we didn't plan on buying. So we walk out with extra items instead of unspent cash, plus X. But those extra items are part of our consumer surplus, along with the X we would have gotten all along.

So we end up with closets and basements that are overflowing with stuff,† but complaining about how we don't have enough money. A lot of that stuff is our cumulative consumer surplus.

† Here's a funny story that I use in my principles classes when explaining this. I live on Leigh Hill, in one of the few houses with a 2 car garage. There's a lot of nice neighborhoods. When my daughter was about 8 she asked "Dad, why do all these other families have big houses, and bigger garages than us, but have to park in their driveways?". I thought about it, and realized it's because most of them have their garages loaded up with stuff. That's what I told my daughter. What I tell my principles classes is that having a lot of stuff is a sign of consumer surplus.