I’m a foreign student who has been living in the US for about 5 years and the one thing that never ceases to amaze me is how firms in the US fights for the demand markets-dropping costs a little above their marginal cost, bundling products for even better deals, and most importantly the amount spent on marketing to create the sense of absolute necessity for consumption.
Firms use the holidays to try to capture the majority of consumer surplus as best they can. Consumers in the US have the power to consume because the wages in US are relatively higher than those of other countries, and as a result firms try to use marketing to create a necessity of their product to the consumers. For example, take the PS3- it is common knowledge that when Sony released their new gaming system they sold it at less than their marginal cost, or in another words they took a loss, in order to gain market share. Sony knew that if enough people owned the PS3 to begin, word of mouth about the superior of the system would be their greatest marketing tool.
From what I heard, read and saw from marketing on and for Black Friday, consumers responded positively to the very aggressive promotions and discounts being offered in big retail stores. On Black Friday, people radically switch from very calculated to very compulsive consumers. I’ll explain why-first, people camp outside of stores in order to ensure they will either get a voucher for the hot item or just to be one of the first in. Once they enter the store, competition is on! Consumers don’t even think twice about trampling someone to get their target item, because quantities are extremely limited. However, remember, I said people switch from calculated consumers to compulsive. This is because, say for example the crazy consumer who waited for 5 hours doesn’t get the item they waited for because the store only has 4…the consumer figures they may as well buy something, although it may not be such a great deal, only because they have waited for so long to get into the store so they have to try and compensate for their time by buying something.
Thursday night I was checking my email and I logged in yahoo and I saw the advertisement about how Wal-Mart was basically having a price war with Amazon.com on PS3 bundles. They were bundling PS3 fighting + 2 video game +I DVD for the same price as the PS3 costs normally. Later, I saw that Best Buy had entered the PS3 market war.
Black Friday has a huge impact in US economy as firms capture huge amount of consumer surplus selling with good deal and bundles. Black Friday is such a big day for retailers that stock investor gain a huge profit just the single day and the firms who have the most impact in sale were the ones who expose their sales using big campaign of marketing. Just to mention one, Wal-Mart brought in returns of 0.64% and -1.46% respectively.
As we know, Black Friday is the best sale day of the year for both consumers and producers. Both consumer and producers really think they profiting? I don't think so. While the prices are suppose to be very low for consumers, there are only a few amount of products being sold during this day. Most consumers think they're getting the best deals of the year. But are they really? I oppose to that. I believe consumer are wasting more on driving to all these different locations such as Wal-mart and Target, and wasting their precious time waiting in line for hours and hours. So while they think they going in for a product that might have at least 10 or so, they fooling themselves. I was reading article that stated some facts on how many items are going to be on sale for Black Friday and the amounts are very low. For example, Macy's being one of my favorite stores are better deals on electrics and jewelery but not much on clothing. They had about 250 items store wide that were going to be on sale for the morning of Black Friday. I don't shop much of electrics and so, I focus more on clothing at Macy's. So due to the less amounts being sold, I decided not to waste my gas and time going to Macy's that early morning. I did wait till the afternoon around 1pm when the sales ended and stoped by to see what other deals they had, but not low enough for me to purchase anything. I believe Black Friday is not for everyone. It's basically for those who plan on buying electrics, that's just if they have a better chance of purchasing the products if not sold yet.
ReplyDeleteOn the subject of matter about bundle thou, I do believe they might have good deals at certain firms but they will have a riot due to price competition. While one firm sets a price for a bundle on the website, blackfriday.com, other firms will compete to those prices and set there bundle for a lower price. Although the prices might not be to low, maybe just couple of cents, it still makes a difference. Consumers like me, do look into the cents more than the dollar amount then focus onto the quality of the product. Overall, if firms place less products with prices on the web, especially on the Black Friday, they might just increase they profit by even a little bit more than what they expected. Firms will still find a way to compete with other firms, but at least actually prices should not be shown. Showing sale percentage off and dollar amounts off will still bring firms consumers to their location.
Compulsivity of shoppers-
ReplyDeleteI question whether the majority of purchases made on sale days, such as Black Friday, are compulsive. These sales occur every year and many people, including myself, plan on shopping on these days. I believe that people may purposefully save money to shop on such days, thus carefully allocating income to make wise (in comparisson to non-sale prices) purchases. These decisions reflect on planned consumerism. If consumers know that after a certain day, a product will be siginificantly less expensive, then they will be driven to purchase on sale days, making their purchasing decisions non-compulsive in nature.
For many people Thanksgiving Day is a time to prepare for the ever famous "Black Friday". Even though I am not one of those people, some of my family members sit around searching through ads highlighting or tearing special items that are on sale. This day is one of the most calculated days due to the extensive preparation that is put into it. I can understand the instances where people wait in line for hours and leave with a compulsive purchase. They know that there is always that possibility shopping on this day, which is why they have scoped out second options in cases such as this.
ReplyDeleteConsumers know that the "Black Friday" deals are part of the adrenaline rush to experience. Throughout the month of December there are low prices of items on sale to persuade consumers to shop their store instead of their competitor's. Christmas season in the retail business is a time that they can prove to consumers that they should shop at their store. The importance of competitive prices is the primary source for consumers to calculate their purchasing habits. There are and will always be a competitive market, although the preparation and planning that consumers do will result the great bargains that they will find. Firms will charge an amount that they know consumers will pay.
I was educated about the origin of Black Friday not long ago by my director at work. Apparently there are two colors in the merchandising world; Red and Black. Red is for loss or break even and Black is for profits and most retail stores are in the red until the day after thanksgiving when they get in the black, hence Black Friday.
ReplyDeleteI realized that even after these crazy reduction in prices if they still make huge profits then they have been killing us from the start. I had always thought they lose money or break even during black Fridays and that they do it to get rid of items and make room for new ones. Consumers should then collude to shop only when there are sales and during black Fridays so they can at least capture some of the producer surpluses that would have been gained if we bought the items on a normal day. This way they still make some profit and we get more consumer surplus, and everybody leaves happy. Isn't that the point of economics, to make both consumers and producers happy.
Everyone here makes a great point. I believe that the sales on black Friday have a psychological affect on the consumers. Most retail stores advertise low prices for goods that is majority electronics. However, there are goods that consumers are just being tricked into believing that the goods are on sale. For example, Walmart had a camera in their black Friday ads that said it was on sale for 99$. However, I had made a trip down to Walmart the day before and saw the camera's original price was 99$. Consumers are sometimes lead to believe that they are getting a great deal on these products.
ReplyDeleteNow I know that this is not always the case, but retailers make their profits by doing these types of things.
Another idea I feel like that Black Friday is such a huge hype is due to the fact that it comes before the holidays. Everyone is expecting great deals and that is the best time to shop for Christmas gifts. They can get a great gift for a low price, rather than giving a gift that looks cheap.