It’s almost that time again, “Black Friday”, when consumers are racing around trying to bag bargains as retailers “heavily discount” certain lines to generate sales.
As with most things now, it originated in the USA, being the day after Thanksgiving Day, and supposedly heralds the start of the Christmas shopping ‘season’.
It rose to some prominence in the UK when Amazon started promoting it, and they then tacked on their own “Cyber Monday”. In recent years, many other retailers started jumping on the bandwagon offering their own Black Friday sale discounts, and noticeably in the last few years, this sale event has been extended beyond a couple of days, with many retailers now using the whole month to offer discounts and promotions.
Everybody loves a bargain, and many people now deliberately wait until Black Friday to make purchases, because they ‘believe’ they will get a ‘bargain’. In many cases, it may actually be true, however to the trained eye, it also exposes how much consumers generally get ripped off by ‘big corporate brands’ in the first place.
It is my opinion, and I have heard anecdotal evidence to support this, that Black Friday is/has become an opportunity for big retailers to clear out old stock, in advance of new stock arriving either for the Christmas period, or for the following year.
If you have containers of new stock arriving imminently, you’ll need to clear your warehouses to accommodate it.
I’ll present how this works with a hypothetical example:
SunnyTV brings out a new model of TV, and retailer BigShop buys 5000 units, at a cost price of £250. BigShop launches this ‘new model’ at a retail price of £500, and thanks to media hype and publicity, sells a large number of these, prior to some big international sporting event, after all ‘everyone needs a new TV for the big sporting event’.
BigShop makes a huge margin on the initial batch of TVs sold, then as sales start to slow, because the Big International Sporting Event has finished, BigShop then starts to reduce the price of this SunnyTV model.
WAS £500 NOW £429!
That then shifts a few more units, and the retail price may even continue to drop more.
At some point, SunnyTV then introduces a new model of TV. BigShop still has around 750 of the older model in stock in its warehouse, but wants to order more of the new model. They need to get rid of the stock of the older model to make room. What’s the best way to do this?
This is where Black Friday comes in! BigShop offers a “30% discount” on this SunnyTV, which to many people sounds like a big reduction. But all that is happening is that BigShop made a good profit on the initial sales, but are now prepared to make less money just to ‘shift the stock’ or turn it into cash.
Some retailers may even sell stock at or below cost price. But overall they have not actually lost any money, the profits were made after all on the ‘early adopters’ who gleefully paid full price.
Congratulations, you just saved £150 on a new TV that ‘was’ £500, what a bargain! To be fair, many people wouldn’t be that bothered, but you just got yourself an obsolete or discontinued model, and any extra warranty or ‘after-care’ you paid for on top is probably worthless.
Thanks to Black Friday, BigShop then sells out of this older model, and within a few days the ‘new’ one arrives, just in time for the ‘Christmas Shopping Season’, because what better way to celebrate Christmas with your family than watching all the Christmas TV Specials and movies on a brand new TV. (Which will then be likely discounted during the Boxing Day or New Year ‘sales’, if the stock hasn’t shifted enough)
That in a nutshell, is how Black Friday works for the big corporate retailers and brands. Sadly, in recent years, it seems that some smaller independent retailers have ‘felt the pressure’ to participate in this bogus ‘sale event’ by offering Black Friday Discounts, even where their own profit margins are tight, and thus have to sell products at a loss, just because ‘consumers demand discounts’ at this time.
I salute those brave independent retailers who refuse to take part in these shenanigans, and stand their ground when it comes to pricing.
It is my opinion that if products were sold at a ‘fair price’ throughout their lifetime, then there would be no need for such ‘sale events’ to clear out old stock.
It is the ‘early adopters’ who ultimately pay the highest price.
