All that is wrong with Black Friday sales.

Long but please read!

It sickens me to hear and see what is happening in the US with regards to the Black Friday sales. Large corporate retailers need to take responsibility and fix all that is fundamentally wrong with this type of marketing. Here is what is fundamentally wrong with the Black Friday shopping even in America:

For some time now, roughly since 2005 but more so since the economic downturn in 2008, retailers have been looking at ways to get consumers to spend. Since 2008 consumers in the user have been counting pennies more than ever and as such they start looking for deals on their purchases. I clear example of this is the couponing craze that became really big in 2010.

Immediately retailers started putting on sales to entice consumers to buy more. However retailers were also suffering losses to their bottom lines due to this downturn. Putting on sales may mean more customers but it also means narrower margins. Along with the price of oil, consumer products started to rise in price. Retailers struck deals with manufacturers to produce identical products but with unique model numbers for individual retailers; this eliminated price comparisons.  At the same time they asked for the manufacturers to increase the MSRP by as much as 50%.

The common assumption is that retailers stock up on goods and then mark down the ones that don't sell, taking a hit to their profits. But that isn't typically how it plays out. Instead, big retailers work backward with their suppliers to set starting prices that, after all the markdowns, will yield the profit margins they want.

The red cardigan sweater with the ruffled neck on sale for more than 40% off at $39.99 was never meant to sell at its $68 starting price. It was designed with the discount built in.

To simplify this let’s look at this example: The MSRP on a widget is $100. After the retailers asked the manufacturers to increase it by 50%, the MSRP is now $150. Previously when the retailer put the item on sale for 50% off the price would have dropped down $50. Now when it goes on sale for 50% off it is $75 (50% more than what it was previously on sale for). The retailer has now made or saved 50% more on the sale and this goes to their bottom line.

Now that the pricing structure has been solved the next issue is how to get customers to buy. The retailers understand that when items aren’t on sale people won’t buy and the cost of doing business is calculated as such. Retailers started to look for a period when they could capture the most customers. That period is the day after Thanksgiving when a large majority of the nation has the day off.

Advertising is one of the largest overheads for retailers. Being able to target up to 80% of your marketing budget to one single day is highly cost effective and rewarding. Also in 2013 this is very important. Consumers are more aware than ever to the true costs of goods, thanks mostly to social networking. In an effort to counter act the effects of this retailers use basically bait and switch tactics to get people to their stores. Examples of a $3000 TV for $800 (limit 1 per store) or designer jeans for $20 limited quantities. These tactics get people into the store and the assumption is that the cost of basically giving away a TV is recouped by the fact that the unlucky customer will feed of the frenzy and feel compelled to make a purchase anyway. After all most of the consumers are shopping for gifts for the holidays.

Now when you take this formula for sales and marketing and add it up, what do you get? You get a large population in a recession that is desperate to save a penny and have the opportunity to provide for their families during the holidays. Families and individuals save all year for this event and they are desperate to maximize the value for money.

Most people can’t afford a $3000 TV but a whole lot of people can save up $800 over the year and take a chance on getting that one TV per store. You see the same thing with toy companies peddling their wares in short supply at the holidays. And with the social pressure on kids these days, parents feel the need to deliver on the “best” toys of the season.

So now you have a large portion of the populous trying to get the best value for money, and a large group of parents trying to deliver the toys their kids “need” to maintain social status. The result? Very large mobs of thousands of people all trying to be the first through the door to get a chance at that TV, pair of jeans, or toy.

By the very nature of mob psychology, people get caught up in the frenzy and it becomes every person for themselves.  People get trampled and crushed; fights break out over the last item; people fear for their lives and pepper spray comes out; people become selfish and motivated and the pepper spray comes out. It’s bad. It is also the same way that riots get started.

This is not how civilized humans should treat each other. Retailers need to take responsibility for this. How much profit do they need? The fact that people are losing their lives is all the proof I need to know that this has to change. It is sick. I am sick to my stomach that I participated in this, albeit online, but nevertheless.

I don’t know what the right answer is but I am open to listen and will join any movement to fix all that is fundamentally wrong with shopping events like Black Friday sales.

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