A friend just sent this:
http://online.wsj.com/news/articles/SB10001424052702304281004579217863262940166
So folks are stressing and fighting over what is likely phantom discounts anyway.
After
working at a discount e-commerce site, I know that some consumers care
more
about the "% discount", rather than the final price (or even the actual
use of the product!). So they fall into
the trap. It's probably better to know what max price you will pay for
item X, and just pick the nicest one that qualifies. The MSRP may
suggest relative quality, but that's about it. My econ prof said that $,
not %,
counts in the end; a cheap toy may be 80% off, but if that only means $3
more in your pocket, it's really not that impressive. And of course it
depends if the full price is reasonable or artificially marked up as the
article said. But the majority of consumers are not that econ-finance
savvy, and probably don't consider these factors in the heat of the
moment.
I just fear that as long as real
wages stagnate, the wealth gap widens, and purchasing power wanes (due
to higher housing, medical, education, & energy costs), people will
find it harder and harder to maintain or increase their consumption
(despite all the marketing messages and social pressure to do so).
Robert Reich said that these trends have been around since the 1980s,
but the US middle class made up for it with home equity and consumer
credit (to the benefit of Wall St.). Now that loans are getting harder
to come by, and of course curbing consumption is out of the question,
the stakes become even higher to secure "deals". That could change the
shopping psychology and make B.F. pandemonium and conflict more likely
and serious going forward. It's like NFL stadium violence - is it any
surprise that it is likely correlated with soaring ticket prices and
overall "cost of fandom"? When you squeeze and raise the stakes on
people, of course they are going to react badly when they feel like they
are not getting their money's worth.
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Happy Thanksgiving dude :)
It's
always kind of baffling to me seeing these kind of "is X good for
society" emails, because ultimately there is no benevolent overlord
responsible for arbitrating this kind of thing. It's just ... game
theory, lots of individuals trying to maximize their own whatever
(sometimes profit, sometimes happiness, sometimes self-satisfaction).
Black Friday
is an interesting concept. My basic mental model is that initially it
was just a naturally-big shopping day, and (given retailers' low
margins) the first day that retailers showed a profit for the year. Then
retailers started competing for shoppers, and because their main method
of competition was "sales" ... here we are.
Obviously you know that sales and coupons were the
old-school form of price discrimination, before the internet and quants
like you figuring out how to get every dime out of the customer ;) But
now it's just old-school prisoner's dilemma, with every retailer
defecting and offering sales. This year they're especially screwed,
because JCP is desperate to sell off the old Ron Johnson-era merch and
is undercutting everyone. It's straight-up race to the bottom, where
half these guys will be out of business in 3 years and the rest will be
lucky to survive 10.
They're not doing it because it's good for the
country or the culture. They're doing it because, like a heroin addict
that hasn't gotten a hit in a while, momma needs that holiday shopping
boost, and they'll do *whatever* it takes to get it. Some trickery, some
desperation, but this is what giant corporations look like when they
die. Like those images of a dinosaur trapped in a tar pit, trying to get
out, every struggle dragging it deeper into the black ooze.
What we're seeing is the end of retail, and this and
the next few Black Fridays are going to be ground zero for that shit.
Loot what you can :)
-----
Thx J, same to you.
Even though B.F. is not a
top-down, command economy program, I still think it is valid to evaluate
the consequences. If we don't do that, then how can we ever know if a
change is needed? Yes, game theory can accurately describe and predict
players' actions given a set of conditions, but to me that kind of
abstracts the situation as if we were just "rats in a maze". B.F. is
about more than transactions. I wanted to consider the human side and
social costs, because it's easy to take them for granted when all we see
are the cool items, big crowds, and blowout prices in the media. As you
said, if these dinosaur retailers are caught in a suicide spiral
race-to-the-bottom, then the poor decisions that contributed to that
situation will eventually hurt millions of shareholders, employees, and
society as a whole (less tax collected, more pressure on social
services).
Negative industry trends aside, is B.F. the best method for buyers
and sellers to achieve their seasonal goals? As recently as the 1990s,
B.F. wasn't even the heaviest US shopping day (that was reserved for the
Sat before Xmas, for gift procrastinators LOL). Some limits were still
respected. But as you said, companies are locked in a fierce rivalry,
and some "innovators" thought to exploit B.F. more. I wish customers
would push back and say, "I don't care how big your sale is. The
holidays are for spending time with loved ones and being good to one
another, not fighting for a spot in line at 3AM just to get an Xbox.
It's not right to encourage rabid consumerism and make your employees
work these crazy hours either." If we collectively protest and boycott,
change will come, like apartheid in SA and cigarettes in the US.
Unfortunately there haven't been many big success stories of corporate
boycotts recently (they defeated the labor movement, and they know how
to diffuse grassroots protest too). But it's American tradition: the
Boston Tea Party was a boycott of sorts by colonial merchants getting
squeezed by the East India Company. So going back to B.F., unfortunately
there won't be boycotts because some customers will likely "cross the
picket line," lusting after deals.
I am not that familiar with the JCP case, but didn't Johnson
try to make the company more upscale and resist coupons/discounts?
Obviously that didn't work and they are now making a big reversal, but
JCP is not a leading retailer (it's $12B annual US revenue is 16% the
size of Target's). So I don't think they are driving B.F. trends, but
they probably will be gone in 3 years as you said (Sears too). However,
predictions of retail's demise could be exaggerated (or at least
premature). In the Bay we are surrounded with innovation, disruption,
and e-commerce, so that could bias our perspective, because US
e-commerce is still only 6% of total retail sales in 2013 (and the
biggest category is travel, because it is expensive and there isn't
really a retail equivalent after the death of the travel agency).
Goliath Amazon still has less revenue than Target. Shopping is still a
communal, visceral experience that e-commerce and social media haven't
fully supplanted yet (some fun, scientific reads on the subject if
you're interested:
link).
Even if Amazon develops cost-effective same-day delivery, many people
will still go to the big box or the mall because it offers a value
proposition that online doesn't exactly match. Yes brick-and-mortar
retail is inefficient with its labor, rent, and overhead, but customers
still demand it.
http://ycharts.com/indicators/ecommerce_sales_as_percent_retail_sales
http://www.statista.com/statistics/191145/travel-e-commerce-sales-in-the-united-states-since-2002/
http://trends.e-strategyblog.com/2013/04/25/american-retail-ecommerce-sales-by-product-category/10687
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I'm sure some of you saw this too, but Black Friday isn't even a good predictor of holiday sales:
