Black Friday: History, Economics and Benefits

Black Friday gift signHistorians aren’t certain of the origins of Black Friday. Their best guess is that the Santa Parades in the late 1800s contributed to today’s shopping frenzy. From 1887 continuing into 2017, department stores like Macy’s held Christmas parades to encourage potential customers to visit their stores. These parades were typically held the day after Thanksgiving. Eventually, more stores held parades and even more dropped their prices to attract holiday shoppers. This practice was likely the beginning of Black Friday.

How can retailers afford Black Friday?

If Black Friday is truly the one day where retailers slash their prices by unbelievable percentages, causing a rush of hundreds or thousands of people, how are they benefiting? Some of the sale items are loss leaders. Loss leaders are products that retailers lose money on, but the store bargains that customers will spend money on other products once they’re inside the store. And they’re right.

In general, Walmart and Target aren’t going to stock a lot of loss leaders on Black Friday. If you look closely at a Black Friday sales ad, they state “while supplies last.” Unfortunately, it’s common for stores to stock 5 to 10 big loss leaders, like TVs or computers. Once they’re gone, and they will be gone within minutes, then customers are disappointed but likely willing to shop other Black Friday deals that aren’t so great. After all, they already waited in line.

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What’s the point of Black Friday?

Profit. Well, most companies believe a strong Black Friday promises a strong holiday season until the New Year. Some research contradicts this; for example, in 2011, a decent Black Friday preceded one of the worst Christmases for retailers. Still, between effective loss leaders and deals that aren’t as great as people like to think, Black Friday is a major kick off to all of the profit to come.

For consumers, there is little point to Black Friday other than the joy of competition and the excitement of being one of the few to get the best deals. The unofficial holiday has been extended in recent years, spanning from late Thursday to Monday. Some of the best deals can be found online, avoiding dangerous crowds and impulse temptations altogether.

As time goes by, the correlation between Black Friday purchases at brick-and-mortar stores and how well the holiday season goes for retailers will be even weaker. More people are shopping online or shrugging off Black Friday altogether.

What can Black Friday do for me?

If you’re looking for a job, November is the holiday hiring season. Businesses are looking at last year’s sales, trying to determine the number of permanent and seasonal workers they should take on before Black Friday. Even coffee shops, grocery stores, movie theaters gear up for winter, expecting an uptick in sales.

If you’re looking for a credit card, now is the time to get one. Credit card companies like profit too, so they generally roll out generous promotional offers from November through December.

If you’re looking for a good deal on toys, electronics, or clothing, Black Friday might be hit or miss. Do your research by comparison shopping. Stand in line if you want, but go early because many stores are done with stampeding crowds. Instead of allowing a rush of people in, most stores hand out tickets good for certain items, in addition to staggering the number of people they let inside, eliminating the need to run around.

For the latest Black Friday deals, see your local ads. The biggest retailers have already announced their deals.

Posted on November 21, 2017 by in Personal Finance

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