Why Retailers Started Promoting Black Friday Sales So Early This Year
The holiday shopping season keeps getting longer and longer.
We're a little more than a week away from Black Friday, the unofficial beginning of the holiday shopping season. It's been well-established for close to 100 years: depending on the type of person you are, the day after Thanksgiving is either the best day or worst day to go shopping. On one hand, you can buy a 4K TV for over 40 percent off. On the other hand, you might end up in one of these videos in the process of purchasing one.
But over the past ten years, Black Friday has become less about the day and more about the overall economic goal behind it, calendar be damned.
"Some companies will start promotions even as early as September or October," said retail strategist Sucharita Mulpuru in an interview with Motherboard. "I think that the big challenge is always around, 'How do you deliver a good Q4 [4th quarter, from October to December]?' For certain categories like apparel or jewelry that are highly seasonal, they're very dependent on Q4. And if they don't have a lot of other tricks up their sleeves, starting sales earlier is an easy way to try and get their numbers."
Mulpuru is the new chief retail strategist at ShopTalk, a platform for startups and established brands to collaborate on retail and e-commerce. She is a former retail analyst at Forrester Research Inc., where she primarily focused on e-commerce, consumer behavior, and trends.
"In the last few years, there's also been a lot of [delivery and shipping] issues with online sales in late December leading up to December 25," said Mulpuru. "So when retailers have an opportunity to pull forward some of those sales, that could be driving the aggressiveness as well. Most customers have a finite budget that they will spend during the holiday season. And if you can get them to spend that earlier rather than later, that is better for you as a retailer from a fulfilment standpoint."
The expansion of Black Friday happens on both a micro and a macro level. On a micro level, it's about opening the stores earlier and earlier. Traditionally, stores used to open on Friday at 6AM to accommodate the extra traffic. That turned into 5AM. And then that turned into 4AM. In 2011, Macy's, Target, Kohl's, and Best Buy decided to push the opening of their stores to 12AM. In 2013, Walmart made the decision to open its stores at 6PM on Thanksgiving the day before, which meant that consumers had to choose between eating Grandma's harvest cake or fighting over a $38 vacuum cleaner.
On a macro level, Black Friday now encompasses a multi-day shopping experience. In 2014, Walmart moved from a single day model to a five day model, which spreads its deals out over a week. Target, ever competitive, offered Black Friday deals on the preceding Sunday to Thanksgiving. And now, in 2016, Black Friday sales have begun to encompass all of November and October as well. Best Buy currently offers "Flash Sales" and "Black Friday prices" on its website.
The Disney Store just finished a "Magical Friday" sale that offered up to 40 percent off on its merchandise, plus free shipping.
Back in 2010, Mike Riddle, who created Black-Friday.net, warned us to be cynical about early sales—that many retail companies could be taking advantage of Black Friday's branding to sucker customers into typical deals.
"Retailers are taking advantage of the term," Riddle told the New York Times. After all, customers are conditioned to never buy anything at full price, only on discount. And because Black Friday implies the biggest possible discounts, it's sure to grab some eyeballs. What does discount truly mean, when everything is always "on sale?" When stock is always "on clearance?" When any seasonal pop-up retail store is "going out of business," and "everything must go?"
"In many cases, consumers will hold back on spending because they are anticipating a sale and believe that the deals will be best on Thanksgiving weekend," said Mulpuru. "Often that turns out to be the case, more or less."
But it's clear that many stores are slashing their prices, earlier and earlier, to Black Friday extremes. And it gets to the point where stores lose money rather than earn it, especially when customers are savvy enough to cherry pick the best deals from each flyer. Because stores do not earn their wide profit margins from the doorbusters and limited quantity, big ticket discounts. The hope is that the customers will stay in the store after grabbing the deals and purchase other more profitable items. If they don't, then retailers take a loss. They may have to offer even bigger deals, and risk losing even more money to beat their closest competitors. And around and around it goes, a vicious cycle of keeping up with the Joneses. A bigger company might have the horses for it. A smaller company might not.
And then there's the menacing spectre of online shopping and Cyber Monday, which is slowly chipping away at the entire business model. Mulpuru estimates that for many major department stores, 20 percent or more of their sales are coming from e-commerce. What will companies to do with their brick and mortar stores? It's not as simple as shutting them down; these companies have leases to pay. Mulpuru suggests that we will see more "omnichannel" sales and marketing, where online shopping and brick and mortar shopping are intertwined. Perhaps a customer can order something online and then pick it up at a store location. It's convenience, crossed with the intimacy of a 1-on-1 experience.
Consumers can expect to see Black Friday sales continue and increase in the coming years, especially because it's no longer bound to the calendar. It's more of a concept, and it's a high stakes arms race that no retailer can afford to lose. That also makes it an arm race that every retailer must be a part of if they want to stay competitive.
"You [retailers] have to," said Mulpuru. "Consumers expect to have sales, and you can't not do it, because that's where the shopper is."