With such low sale prices, it seemed difficult to see how these companies would make a profit off Black Friday. Its evident that with such low prices, very little or even no profit may be made of some products.
One reason is brand loyalty. If a company does not participate in Black Friday, their TV sales will drop as people will buy their TV from another company with a sale. This means they would lose some of their customers. In order to maintain their customers and sales numbers, companies have to follow this trend of sales.
Another big reason is loss leaders. Loss leaders are products sold at very low prices in order to attract customers into a store. The company then makes a profit by the additional products the consumer buys when they visit the store. A person may go into a store in order to get a TV, but will also come out with an extension cord and a DVD player that were not on sale. The extra products the consumers bought is where the profit is made for many cases.
How often do we need a new TV? Some people may buy the TV because its a good deal, rather than the fact that they actually NEED a new TV. Of course, these extra sales with the addition of more customers will allow companies to gain more profit.
It's funny how companies can benefit from ripping themselves off. We often are so busy focusing on the $100 we saved, we forget the $200 we just spent. In fact, we often confuse spending less and saving. In the end, we are only spending less, and not saving anything. Studying Black Friday from an economic standpoint, we really began to wonder whether what one "saved" by getting trampled in Walmart early Friday morning, was really worth it.
I think your article was really interesting in that it not only talked about why participating in Black Friday is helpful but also how it hurts businesses that don't participate. I also thought it was cool that you referenced the industry strategy of making people think they "need" things even when its just false desire through marketing. I think Black Friday is a lot more symbolic than it is anything else, a lot of times stores slowly raise the price on things up to the Friday such that when they have a "30% discount" its really just 10% or something very marginal.
ReplyDeleteI find your post very interesting because it is something I, as well as many of my classmates can relate too. Being a person who went Black Friday shopping, I too questioned why companies would sell at such a low price. Something I did not think about which you brought up is loss leaders. I have experienced this myself. When I buy a certain product for cheap, I tend to search for more products from that company. This is a great marketing strategy because it lures people like me into the rest of the company and its products.
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