Why is it that stores mark down some of their most expensive items and stay open all night — fully staffed — during the busiest day of the busiest shopping season all year? It’s like they’re throwing away money, right?
Nope! Here’s how doorbuster sales really work.
Okay, let’s start with, why do they have to mark things down so much?
Because the eye-popping price gets you in the door — the idea (hopefully not literally) is that it’ll make people bust down the door. Clue’s in the name!
Yeah, but why that much?
You mean like Walmart’s upcoming Black Friday specials, which include a 65-inch TV for $278 and an iPad Pro for 50 percent off?
Each of these are what’s known in marketing as loss leaders. Loss leaders are products sold at a loss to attract customers, meaning, the store breaks even or loses money on them. (Though it’s also worth pointing out that this iPad Pro is last year’s model.) Anyway, the whole point of loss leaders is not only to grab your attention, but to simply get you in the door. The ultimate goal isn’t for you to buy that low, low priced TV — that’s just the McGuffin. The goal is to get you to also buy a bunch of other things once you’re inside, ideally stuff that has a much more robust profit margin.
So it’s kinda a scam?
It can be, though it’s usually not. The only times it’s a bit shady is when that advertised television or whatever it is with the too-good-to-be-true price isn’t actually available. But hey, you’re in the store now, with the intention of buying a TV, and… what do you know? They just happen to sell other, more expensive TVs! This is more pointedly known as a bait-and-switch. Reputable stores actually do have the heavily discounted items in stock for Black Friday — it’s not a trick or an illusion, and there’s no switch. But the item is definitely bait.
Don’t the stores want to make money on most of the things they sell, though? Especially big-ticket items?
Take it from a big-box retail expert: They’re not actually making much money on those big-ticket items in the first place. How many zillions of other stores sell TVs? Laptops? Video-game consoles? This expensive stuff isn’t Walmart’s or Target’s bread and butter at all. The markup on those things, for these stores, is small, and they sell proportionally far fewer iPads compared to, say, an Apple Store. However! If you get a TV, you’re going to need some cables. If you get a video-game console, you’ll need games. The markup on those items is much, much higher, and they’re happy to sell them to you, along with an extended warranty of dubious value.
Also marked-up much higher? All the other things in the store that are the bread and butter of big-box retail: potato chips; shampoo; private-label underwear; hardware; batteries; Christmas decorations; that perfect gift for your brother/sister/parent/cousin/etc. Individually, all these additional purchases that customers make while in the store on Black Friday don’t feel like much, but they really add up. This is backed up by solid science, with retail market analysts saying their research shows people increasingly make impulse purchases and self-gift on Black Friday, too.
Why would people buy other stuff in addition to the thing on sale?
This is where things get interesting — a German psychologist and neuroscientist actually looked into this stuff around Black Friday. Did you know that sales trigger our brain’s reward system in the same way that drugs do? Sales get people fucking high, man, or at least give them a rush. And triggering the brain’s reward system lowers our inhibitions — the regions of our brain that ordinarily scrutinize our behavior and keep our decisions in check basically shut down when confronted with a deal.
Let’s consider some other things going on as well: Black Friday shoppers got in their car, fought traffic all the way to the store and are in a mindset to deal with crowds. So you’re Goddamn right they’re in the mood to purchase things! As for those strange all-night hours on Black Friday, it may seem crazy, but it’s crazy like a fox: Just as the loss of a sense of time inside a casino affects your judgment, the time disorientation of late-night shopping fries your normal inhibitions and decision-making processes.
In addition to the neurobiology of sales described above, let’s factor in the competition for, and scarcity of the product. Everyone’s adrenaline is spiking — do you think anyone is making rational decisions in that state? Of course not, everyone’s fight-or-flight responses turn the day into a holiday-themed episode of Supermarket Sweep.
So it’s all pretty complicated, then.
There’s even more going on under the hood, actually. According to an economist, Black Friday is also an excellent opportunity for stores to take advantage of price discrimination. That’s the economic term for getting customers to pay different amounts for the same product, based on their financial ability to pay more money for it (just like how cheapskates, rich folks or people on a date can all see the same movie but pay vastly different amounts for it, based largely on their concessions purchases).
In the same way that the hassle of hunting for and clipping coupons filters different kinds of customers to a store, Black Friday sales can attract different types of consumers to the same desirable product, or even to the store itself — maybe types of people who don’t normally shop there. It turns out to be a win-win all around for stores, even if they have to lose a little money on selling a single item.
Do stores make a big profit on Black Friday?
Sure — why else do you think this race-to-the-bottom madness persists? Sixty-six million people shopped on Black Friday in 2017.
And is Black Friday worth it as a consumer?
You mean financially? It depends on what your time is worth to you. If you don’t mind the hassle and you’re able to get a good deal on the thing you wanted — and avoid ancillary impulse purchases — sure. But know that sometimes, Black Friday doesn’t even have the best deals of the season.
There’s another way of looking at this question, though: Consider the fact that lots of people actually like shopping on Black Friday. Why? According to Money, people get excited about Black Friday: It’s something to do with their friends, a ritual when people lower their guard to buy stuff under the assumption that they’re not going to get ripped off that day (at least not on the price of any one item). So yeah, for a whole bunch of people, Black Friday is completely worth it — not just financially, but intrinsically as well.
Sounds kind of fucked up!
Well, yes. Those strange hours, the surreal prices, the rare but infamous bloodsport spectacle that shopping late after Thanksgiving has become. These aren’t bugs — they’re features! Features that only the evil genius of corporate America could shrewdly manifest into a family tradition. Think about it: They took a wholesome, traditional family holiday weekend and turned it into a weird, frenzied ordeal, a consumerist orgasm shopping-holiday that has literally become an American tradition, complete with ominous name.
It seems to all be further neurobiological proof that, when the human brain is faced with an amazing sale, chaos and irrationality ensues.