Black Friday has a long-standing tradition in retail. Over the years its reputation has been tarnished, but still many people participate, assuming they are getting great deals. But the truth is, retailers life to us to encourage a boost in sales. Here are 4 little-known facts about Black Friday that could change your mind about shopping on this day.
On Black Friday, stores don’t price things so low that they lose money.
Retail uses ridiculously high markups to start out with, so they reverse-engineer their prices to ensure they are never taking a loss. According to shopify.com, the average retail markup on any item is 50%. So the “regular” price is essentially double the cost of the product.
But they know people love deals, so they have a “sale” price at a comfortable profit.
Here’s an example given by the Wall Street Journal from a few years ago:
A sweater costs $14.50 wholesale.
“Normal” price is $50 (70% + markup) or a $35.50 gross profit
“Sale” price is $44.99 (still over 65% markup) or a $30+ gross profit
“Deep discount” or “Black Friday” price is $21.99 (still around 33% markup) with ~$7.50 gross profit
Average retail price based on sales throughout the year is $28.00 (~45% markup) and $13.50 gross profit
At no point in time are they losing money on this item, even though $21.99 seems like a huge cut from $50. So when you wonder how stores can offer such low prices on Black Friday, that’s how—and while it’s a discount, it certainly isn’t a loss. Of course, that’s assuming that the prices are actually discounts…
2. On Black Friday, prices are not necessarily lower than the rest of the year.
Consumer groups that track pricing found that if things don’t sell on Black Friday, retailers will often drop the price even lower the following week (source: Brad’s Deals). They may also have a lower price the week leading up to Black Friday, but still advertise the same price as a Black Friday sale price to increase the feeling of exclusivity and urgency.
Not only that, but they will often increase their prices an average of 8-28% before the sales start, so the sale price looks like a nice discount but is actually the normal price (source: Wall Street Journal).
3. Black Friday sales rarely include the best, latest items
The products on sale for Black Friday are often the ones that would go on sale anyway. They’re last year’s models, and the stores want to clear out the inventory to make room for the new models. So if they don’t sell out on that Friday, undoubtedly they will continue to be discounted the rest of the season.
There’s also evidence that retailers will sell the same item for the same price from one Black Friday to the next (source: NerdWallet).
And, some products are made just for Black Friday sales, and are of particularly low quality (source: Business Insider).
4. Employees who work on Black Friday don’t always receive extra pay for it
My husband worked in retail for most of his adult life. He worked most Thanksgiving days, which would give him holiday pay, but on Black Friday he never got any extra pay.
So don’t assume that just because it’s a big sale for the store that you are helping out an employee by shopping on that day. With a ton of extra work and impossible sales goals, there is usually far more stress than benefits for the average retail employee. And that’s not including all the extra effort it takes to prep for holiday sales, which is often done during regular work schedules and without extra incentives.
Yes, retail stores often set bonuses when departments or stores meet their sales goals. But these bonuses might be $25-$100 for an average employee, with the bulk of the incentives going to management. In exchange these people have to spend time away from their families, frantically keeping up with inventory needs and serving impatient shoppers. Is it really worth it?
By participating in Black Friday sales, you are putting money into the store’s pockets for sure, not necessarily the little guys’. So is it really “boosting the economy” when the money goes to the big-name retailers and not the working-class people who do all the heavy lifting?
What can you do instead of shopping in stores on Black Friday?
These stores are open crazy hours, including Thanksgiving day, due to customer demand. If everyone stops participating in the shopping frenzies, the craziness will go away. Here are some alternatives to stepping into the Black Friday madness (and shopping on Thanksgiving).
Shop the same stores online. There are often plenty of great deals online, and they don’t require you wading through crowds to get them.
Shop online-only retailers like Amazon. One article reported that prices on Amazon averaged over 17% lower than the Black Friday (in-store) sales prices.
Shop small businesses. Go to your local small business, which will be open on a day other than Black Friday, and do your shopping there.
Shop less or don’t shop at all. The holiday season should be about appreciating and spending time with loved ones. If you feel pressure to buy gifts you can’t afford, have a conversation with the people in your life about it. Love shouldn’t be about how much you spend.