The last week of November always sends a buzz throughout the market place. It is the week that we get to experience Black Friday, a day where retail shops, large and small offer cut-throat discount prices just for the day and perhaps the weekend that follows. But pause a bit. Have you ever wondered what the logic behind the discounts really is on this day? Better still, if such discounts are good for business why don`t the same businesses offer the same discounts more often. In this article, I attempt to have a quick look at some aspects you probably didn`t know to make up for the reasoning behind Black Friday.

Loss Leaders As A Way To Make Money For Retail Shops

There are many direct and indirect ways in which retail stores offering discounts on Black Friday make money. Let’s consider the concept of loss leaders as drivers of sales amongst the store`s available product lines. With the loss leader, a retailer loses money on these items by putting them but makes effort to ensure that such products ultimately increase the probability of visiting customers to buy other things. If customers do not buy other items in-store, efforts are made to ensure that relationships which drive the business towards profitable future engagements are created. A business may offer to visit customers on Black Friday favourable plans such as warranties and servicing which work much towards creating brand loyalty thus fostering mutually beneficial customer relations in the long run.

Price Discrimination To Tap Into Neglected Customers

Retailers also make use of price discrimination as a means of tapping into the savings of those customers who would otherwise fail to make purchases of their desired products/service during the course of the year. This follows the basic principle in business that if a customer can pay more, you need to maximise your chances with him/her. More often than not this results in businesses targeting high-end consumers to put high mark-ups on their products/services. However, although prices may be high, there is also a low-income consumer who is always willing to purchase a product/service from these high-end stores but only looks forward to doing so on a Black Friday. On such a date, the retail store would then have it that you can get X product or Y service at discounted Z price if you can make it to the store by 5 am. Normally the high-end customer might not be able to come and buy but the low-end customer will see this as an opportunity to make the purchase they had been hoping for.

Price Manipulations To Boost Sales

There is a sense in which retailers manipulate prices towards the last weeks of November. Perhaps this applies to the Zimbabwean context but some retailers inflate their retail prices only to revert to the normal price on the supposed day of discounts, Black Friday. If this is the case, then Black Friday might be nothing more than just a psychological gimmick which pushes people into overspending all in the name of bargain discounts.

Black Friday Kicks Of The Holiday Shopping Season

For an economy to grow, consumers have to spend their earned money. As a result, Black Friday is popular amongst retailers as a kickoff to the holiday shopping season. The holiday shopping seasons synonymous with the festive season is critical in the growth and general upkeep of the retail industry and a look at the performance of such businesses always shows a positive sign from this period going onward till the end of the festive season.

Black Friday As An Opportunity To Promote The Buy Local Campaign

In an economy where the majority of products on offer are imported there is a growing need to promote local consumers to buy locally manufactured goods. As has been mentioned earlier, Black Friday marks the beginning of festive shopping it thus becomes important to encourage the local market to buy more of the locally produced goods. Retailers often achieve this by selling such products at very low prices. It is estimated that in South Africa, 66% of all local shoppers took advantage of Black Friday and spent on average R1600 each. Now, one can thus estimate what this would mean for both the economy and local manufacturers on Black Friday and the subsequent festive season days.

Why We Only Have Black Friday Once

Among many reasons as to why we can’t have Black Friday More often is perhaps the effects of diminishing marginal returns. One needs to note that Black Friday limits the total budgets of consumers because of the psychological impacts it poses on consumers. The scarcity of discounts psychology will push consumers into overspending simply because they think, if I don’t buy this now it may not be this cheap again for a whole year.