Here’s the thing about Black Friday – it’s a day where we see the absolute marketing genius of many retailers truly shine, as they offer so-called deals on products that you probably could have picked up cheaper during other times of the year.
How does the math add up with all these discounts? It doesn’t.
As I was going through some media photos of the hysteria of Black Friday this year, I couldn’t help but wonder how all of these retailers can afford to “slash prices” down to “rock bottom”. Some offer 50% to 80% deals off of their regular pricing. Black Friday deals. Incredible savings. Insane prices.
How does the math add up with all these discounts?
Bottom line: It doesn’t.
The Black Friday deals that aren’t
The fact is many retailers see an increase in their profit margin during the holiday season, especially Black Friday. As Bloomberg reports, “Among the 15 largest U.S. retailers, operating margins in the holiday quarter last year (2013) were 11 percent, compared with 9 percent in the preceding nine months. Amid the year-end shopping frenzy, these companies padded their bottom lines, on average, by roughly one-quarter.”
Black Friday savings are a hoax, says Bloomberg.
The Wallstreet Journal agrees. The dirty little secret behind Black Friday deals lies in clever price massaging throughout the rest of the year, and especially in the weeks leading up to Black Friday.
Retailers push prices up as temperatures cool off ahead of the holiday buying frenzy. Black Friday discounts appear to offer consumers remarkable savings; reality, however, paints a very different picture. Artificial price increases before Black Friday lead to inaccurate expectations of savings.
Who cares, right? Saving is saving.
Not exactly. As the Daily Mail in the United Kingdom reports, six out of 10 products from last year’s Black Friday deals were sold for a cheaper price during other times of the year. This includes tech products like curved flat-panel televisions and Fitbits.
Even worse, many of the Black Friday deals consist of products that retail stores simply want to get rid of to make way for newer products. Other times, the items you’re buying are cheaper versions of what you think you’re buying. “It’s easy to sell a TV for $100 less when it’s made of cheaper components,” writes USA Today.
USA Today continued, “The core danger of Black Friday lies in temptation and its associated pressure. If you think you’re getting a deal, you’ll feel compelled to make a purchase. But if you buy something for the sake of snagging it on sale, you won’t end up saving any money at all.”
But it’s true, there are some genuine deals to be had. Those, however, tend to be “loss leaders”. Retail stores intentionally accept small losses on select products as a way to get customers in the door knowing that customers will likely pay full price for other products as well, easily making up for the loss.
Are there any Black Friday deals?
There are deals to be had, but don’t let yourself believe that everything is being discounted. Even the so-called “deals” aren’t necessarily true deals.
Check out this Nerd Wallet article about the best time of the year to buy, well, pretty much anything. Notice that items like jewelry, gym memberships, iPhones and televisions aren’t best-priced in November.
For example, the very best time to pick up that brand new big screen television? It ain’t Black Friday. It’s right before the Super Bowl.
While there are deals to be had, much of the things we see as “on sale” aren’t truly on sale, and certainly, Black Friday isn’t the only time those items can be had for those prices.
Five things work against us on Black Friday:
- Retailers increase prices leading up to the holidays to create an illusion that items are “on sale” when, in fact, they aren’t
- Many items that are on sale use inferior manufacturing and components to make the item less expensive than the product we think we’re buying
- Black Friday generally isn’t the best time of year to buy those items; TVs, for example, are less expensive during the Super Bowl season than during the holidays
- Sale items are often older products that retailers need to get rid of to make room for next year’s products
- Actual “sale” products are loss leaders, luring consumers into stores who will most likely buy more stuff than they came in for, easily making up for any savings from the sale item
What should you do instead? Research. If the item you’re looking at is actually on-sale, buy it. Otherwise, don’t waste your money and time cramming into stores during peak periods with the intent to save cash.
There’s a reason why people find success in living their lives off-peak. 🙂
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Yes, must do research and follow the item for sometime so you know when it’s truly a sale. Should do this, especially for big ticket items.
We just replaced our 5 year smart-turned-dumb-and-slow phones and we had been following the prices for a couple of years, and finally pulled the trigger when we saw a real sale.
Nice find! Yup, there are some deals out there, and if you can find them and resist other temptations, you’re money ahead. 🙂
Ah great points here Steve. I actually happened to walk into the mall a couple weeks ago to buy some Christmas presents. While shopping I ran into an unusually honest store employee. Upon remarking that every price I saw was way lower at the register, he explained that this was actually the best day to shop. He told me that prices would be increased from here until Christmas! This included Thanksgiving and Black Friday. He also told me that the store tends to clear items every month or two on a particular Saturday.
So randomly this employee has corroborated your entire post.
Interesting story, Handy Millennial! Appreciate the report. Clever, those stores. Very clever.
Yep, very true. And of course there’s the other factor – just to get folks in the store. Once they have their little consumer robots inside, they know they won’t be able to resist impulse buys and picking up “a few extra things” that are NOT on sale.
You’re getting a lot of mileage out of that headline picture. I love it, that one pic speaks volumes!
Yup, those “loss leader” products are huge. You know those already-baked chickens you find in grocery stores that sell for like $5? Those are loss leaders too. They get you in the store with an actual sale, then depend on your temptation to pay full price for another item (or collection of items). Clockwork!
Ohhh this one is my downfall! It’s definitely got me more times than I care to admit. I’m so good about knowing prices and scouring ads to find the “actual deals” but once I’m in the store… any clearance sticker will catch my eye, and oh, I think I’m almost out of peanut butter and hey, there’s a new flavor of fizzy water I want to try… oh dang it, I spent $110 on a 3-item list…
Happens way too easily, doesn’t it?!? 🙂
Shocking. You mean retailers play games with pricing? Who knew? Gees, you could have told us BEFORE Black Friday. You’re slipping, Steve!
(Good thing I didn’t fall for any of the games, proud to say I never clicked “Buy” through the whole crazy Black Friday/Cyber Monday thing, though I did happen to buy my retirement pickup truck…)…..
I know! Whodathunk, right? 🙂
A truck, eh? Whatcha end up with?
I went big, my friend. 2017 Ford F250. Without too many details, I was personally involved in the conversion of the F-series from Steel to Aluminum. One of the biggest developments in my career, so I decided I’ve earned the right to “Live Like No One Else” and buy the truck that has so much symbolism in my career. The perfect retirement truck! (Next up, the 5th wheel. We know what we’re getting, just waiting to find the right price….targeting Jan/Feb for the purchase!).
Nice, Fritz! Those 3/4 ton trucks are a great value and pull almost anything this side of a monster RV. For most of us, the only reason to go with a 1-ton truck is for the payload, not towing capacity.
Exciting times!
So very true. Percent off is especially misleading as they jack up the price it compares too. Most of the real deals appear to be limited quantity loss leaders as you denote. We do buy on cyber Monday but only items we watch for a while and understand their consistent market price.
The more research you do, the better you’ll fair. Definitely sounds like you guys get the most for your spent buck. Good on you!
This post really resonates with me. I don’t really believe in Black Friday deals either. I realized that those deals are not really deals about 10 years ago when I bought an expensive sweater only to find out that the price was the same on other days of the year. I felt duped.
I didn’t buy anything on Black Friday. My hubby and my MIL did though. I will let them decide for themselves.
We didn’t buy anything on Black Friday either. Just seemed better that way. 🙂
I refuse to shop Black Friday or Cyber Monday deals. Most are ripoffs, I have noticed the prices shooting up in the months leading to the Black Friday event. Retailers are very savvy and they know when and how to get the most money out of us.
Savvy indeed. And clever. Creative, too. Well-paid, perhaps. 🙂
I’m as shocked as Fritz! I brought shoes and makeup during Black Friday 2 years ago and regretted it after the deal high came off. They weren’t great deals in the first place.
This Black Friday, we only brought underpants. Because hubby really needed underpants.
Ha! Well, if underpants are needed, then underpants must be procured!
I worked in and lead retail organizations for years. There are games played by everyone — retailers and consumers.
The ones that play the games the best “win”. 😉
Well put, ESI. 🙂
I started using a plugin called Keepa recently. Whenever you look at an item on Amazon it shows a chart right on the webpage (like magic!) that shows the historical price of the item. Many fluctuate a LOT, and it helps you understand if the item is really “on sale”…or jacked up.
As for retail games, like ESI Money I worked/managed retail for years and can only say a Sale! tag is pretty much non-informative.
Like a wise computer program once said: “The only winning move is not to play.”
Ah, very cool! Hadn’t heard of that plugin before. Will take a look.
I’ve noticed this over the years too. Prices get pushed up and then get put ‘on sale’. It’s silly, but I guess this stuff works… otherwise why would the retailers do it?
I think a lot of these sales are targeted at impulse buyers. In many cases the models on the products sold are cut-rate versions with inferior components. Some might even be models made only for black friday/holiday sales.
Let the buyer beware!
Definitely, it’s the impulse buys that make Black Friday what it is for retailers. Temptations. It says “Sale”, so you gotta have it, right? 😉
I figured this out a few years that the prices on Black Friday are not really deeply discounted. But those are the tricks of the trade for these retailers and every year a whole bunch of consumers fall for it by waiting outside in the wee hours in the morning before the stores open, I believed that lots of them open on Thanksgiving evening now.
Yup, stores are opening earlier and earlier. Soon, they won’t even be closed at all.
Steve, very good information. Thanks for sharing, especially in this holiday shopping season. To me, grocery shopping is a necessity. Other than that, I don’t like to go to the malls or shop online. It makes me exhausted.
I just try to stay away from the crowd.
Thanks Helen – yup, I’d definitely agree that food is a necessity! It’s good stuff. 🙂