Defense

Does the Black Friday madness make sense?

24 Nov , 2009  

We are just days away from the biggest retailing day of the year in the United States: the day after Thanksgiving, Black Friday.

It is a huge retail day for many reasons: people have the day off, Christmas is just a few weeks away and everyone is feeling content and happy after spending a day giving thanks.  People are ready to buy.  The other dynamic, of course, is the wave of Black Friday discounts.  Virtually every retailer will run an impressive discount Friday morning to lure in shoppers.  These are sometimes terrific deals.

Should a retailer discount on Black Friday?  This is an easy question: of course. When all your competitors are discounting you have to keep pace.  People are focused on finding great deals on Black Friday, so retailers have to play along.  The ones that don’t might as well just extend the Thanksgiving holiday and take another day off; without discounts there won’t be much in the way of traffic.

However, retailers should think carefully about Black Friday discounts.  The offers should have broad appeal.  Promoted prices have to be competitively strong; running a promoted price that is likely to be beaten by a competitor is a bad idea.  The offers should also have a short time fuse.  It should be a notable, quick discount with a clear goal of driving excitement and traffic.

For shoppers, it only makes sense to hit the stores on Friday.  The deals will be terrific and things will be festive.  It is a good time to enjoy the chaos and support the economy.


3 Responses

  1. Tim Calkins says:

    Josh—Some discounting is fine and healthy for a business, but too much can indeed lead to a destructive spiral.

    My sense is that Black Friday is a unique moment in the year, which gives retailers the opportunity to make some very aggressive moves without huge risk. I think consumers understand the deals are unique and special on Black Friday, so they are less likely to demand them all the time.

    Tim

  2. josh duncan says:

    Professor,

    I am interested to hearing your thoughts on the right vs. wrong way to price these discounts.

    My concern is that by driving some of these insanely cheap deals, you could be accelerating a decline in your customer’s price perceptions. They might not expect the insane deal everyday but the normal sale price may start to look expensive.

    As a retailer, you need to drive traffic but how do you avoid long term damage?

    Thanks,

    Josh

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