Retail Economics

Sunday 28 November 2021

The importance of Black Friday

The last week of November is one of the most significant periods in the year for retail spending. Black Friday (the Friday following the Thanksgiving holiday) is a calendar date that is synonymous with shopping. Black Friday and the following Cyber Monday are increasingly online retail events, but when you combine them with in-store sales they are the busiest shopping days of the year in many countries.

In recent years, Black Friday has become a global retail phenomenon with retailers in counties all over the world adopting it as a period for sales. An event that started in the US is now also a key retail period in Europe and Asia. Historically Black Friday dates back to the 1950s when police in Philadelphia and Rochester used it to describe crowds and traffic conditions on the Friday following Thanksgiving. It was also a term used to describe a US stock market crash in 1869.

These are some black Friday sales statistics from the US:

  • $180 billion value of sales
  • 84 million in-store shoppers
  • 93 million online shoppers
  • 24% of all online sales were through Amazon
  • 25% of all online sales are made from smartphones

Here are some observations of Black Friday from an Economic perspective:

The people drawn to buy products on Black Friday may be more price-sensitive which means demand for goods is relatively price elastic compared to other times in the year. People who wait for Black Friday discounts are likely to see price as their main buying factor. By discounting goods in the period when demand is relatively price elastic, retailers can increase their sales revenue.

Retailers use Black Friday as an opportunity to sell complementary goods to ones offered in the sales. For example, a discount on laptop computers may draw consumers in to buy a new laptop but they might also buy new software, product insurance and accessories such as a case. Again, this is an opportunity for retailers to increase their revenues.

From a macroeconomic perspective, Black Friday can be an indicator of consumer confidence and trends in consumption spending. Initial data from this year suggests US consumer confidence is relatively strong based on good Black Friday sales figures.

Black Friday has behavioural economics significance. From a framing bias perspective, consumers are attracted to the word ‘sale’ because it suggests they are getting a ‘better deal’ than normal. Black Friday can also have a ‘bandwagon effect’ on consumers. If everyone else is shopping on that day you feel you should be shopping as well.

Overall, Black Friday has significance from a microeconomic and macroeconomic perspective because of its impact on consumers and businesses.

Discussion questions

1. To what extent might demand for a good become more price elastic during Black Friday?

2. Does the increase in online sales reduce the ability of retailers to sell complementary goods?

3. How significant is Black Friday as an indicator of consumer confidence?

4. Discuss the importance of the word 'sale' in behavioural economic terms.