Economics of Black Friday

Today is Black Friday, one of the year’s most important shopping days.  Malls are filled with shoppers, many of whom are excited about buying items at 40% or 50% or more discount from participating businesses.

I love Black Friday, perhaps even more than Boxing Day sales.  So many items purchased on Black Friday are for someone else, whereas Boxing Day sales are often about getting something for yourself.  Regardless, both days are great for both shoppers and the stores they shop in.

Stores at my local mall this morning were packed, with long line ups of happy shoppers.  The parking lot was full – and this is one of the three days each year (Black Friday, Christmas Eve and Boxing Day) I take a bus and the skytrain to the mall.

Stores are making good money today as they demonstrate one of the two basic ways for a business to make money.  While some businesses charge a lot per customer, today many stores are making money based on volume sales.  These two economic models are ones that a small business owner can choose between, based on market dymanics and the competitive landscape.  You can either charge a lot, which naturally limits the number of customers you are likely to have, or you can charge much less which helps to attract more  customers.  Think successful dollar store, where customers can sometimes score a quality purchase for just $4 or $5.    The store gets 100 people buying the item and makes the same $500 that a more expensive store makes through selling $50 items to 10 people.

As for my business, I choose the high volume approach.  With 30 years experience and an MBA, I could attract high paying clients.  But I enjoy serving small business owners and thus position myself as an “Affordable MBA Consultant”.

Happy Black Friday 2013!