Black Friday Economics

Wow, I woke up this morning, dressed and headed to work, yes some people have to work on Black Friday.  We own a small retail store, and contrary to popular opinion, Black Friday is one of the slowest days of the year for small, family owned retail stores.  Primarily because we cannot compete with the big boxes out there who scream their sales and bargains for what seems like 2 weeks in advance now.  People line up outside Walmart, Best Buy, Kohl's, Target, Macy's, JC Penney, Victoria Secret, and the rest to get "the bargains".  Funny, but I'm not so sure the bargains are there this year, however, they still go and buy stuff that they probably don't need all that bad, to gift next month at Christmas.

I grew up thinking Christmas was the time of ultimate peace.  But I was met with these headlines as I logged on to the Internet.

'Gang fight' at Black Friday sale...
Man Punched in Face Pulls Gun On Line-Cutting Shopper...
Woman busted after throwing merchandise...
Thousands storm VICTORIA'S SECRET...
VIDEO: Insane battle over phones...
Mayhem at Nebraska mall where 9 murdered in 2007...
Shoplifter tries to mace security guards...
Men Steal Boy's Shopping Bag Outside BED, BATH & BEYOND...
Heckler ridicules shoppers, calling them zombies...

Is this peace?  Although, I do like the last headline, because that's what it has become in recent years.  In the spirit of total honesty, I have been in those lines in the past, call me recovering! 

What is the economics of Black Friday?  It comes from the actual name.  Black Friday is the day that most retailers finally get in to the 'black'  instead of the red as sales take off and profits roll.  Did you ever wonder why all they ads state "at least X per store"?  Because they are promoting something that at the very least is at cost, and often below cost to draw people to their front door.  If, for example a store has a 32" LCD TV at the incredible price of $99, but limits supply to 10 per store, then after the 10th person in line, the bargain is gone.  The lines go on around the store, many more than 10.  But after 10, the store has other 'values' to entice the shopper to buy, but these values are making the store money.  And, psychologically the customer thinks they must get something, even if it is not what they really wanted.  It is just a marketing ploy to part you from your money.  Was it worth getting up in the middle of the night to be punched, pushed, pepper sprayed, intimidated, or any other such thing; just to get an average sale product?  Is it worth interrupting your Thanksgiving time with family?  Is it worth forcing the store's employees to have a shortened or non existent Thanksgiving Holiday?

While I am usually a person who disdains regulation and government intervention, I would like to propose a new law.  This law would try to put sanity into the season, without trampling on the rights of people to be stupid, or stores to run their business as they see fit.  It is a simple law, it can be added to truth in advertising regulations already on the books.  Simply put, there is no limitation on when stores can open, nor pricing they can advertise.  But require stores to fulfill all advertise items over a three hour time frame.  One hour before the store opens to 2 hours after the sale begins, any person in line is entitled to the sale price.  If the store runs out of stock, that's fine, they must issue a rain check for the product, and that rain check must be filled in a reasonable time frame.  Problem would be pretty much solved. 

From the store standpoint, they know that if XYZ Inc gets silly, then they will be hurt financially fulfilling the orders.  They can't say "sorry, your too late."  From a customers standpoint, they will know that if they show up at the opening, or shortly after, they WILL get the bargain they want.  No more camping out for days or weeks before, ignoring family life, to get a cheap TV or computer, or video game, that will be obsolete in a relatively short time.  They can enjoy their family and read ads and choose where to go the next day.  And all retail can participate, since a small store's owners would not have to stay awake for 24 to 36 hours just to have the open time, and they will have sanity in pricing which means they will have good bargains as well.

If this is done state by state, then each state can write the law to match their values, adding more sanity to the whole mess we have now.  While I was growing up, my home state, Missouri, had 'blue laws', and while I do not support reenacting these laws, if a state did, there would be no reason not to, again matching the values of people living within their borders.  The blue laws did help retailers more than they would like to admit, the laws helped control cost and offer better customer service, which translates into less shoplifting and a better overall customer experience; and less expense to cover in gross margin spreads.

If you agree with me, I would urge you to send a link to this blog to your law makers, to friends, to the press.  Let's put sanity back into the season.  As my Christan friends say "remember the reason for the season".

Be Sane!