Temporary sales are often a tool for price discrimination. If you need something now, you have to buy it whether or not it is "on sale." But if the purchase is discretionary, you may only buy it "on sale." The store keeps its prices high ordinarily, in order to pick up profits from the price-insensitive shoppers. The store puts items "on sale" on rare occasions, hoping to pick up profits from price-sensitive shoppers. Unfortunately, they lose profits from price-insensitive shoppers who happen to come in the day of the sale.Once you start thinking about the retail world in this way, it is hard not to recognize this logic occurring always and everywhere -- an insight that for me is followed by frustration and melancholia. We commonly tend to think of social stratification as something that is reinforced by lineage and upbringing and by raw bank-account figures, but it plays out more significantly in everyday exchanges with the institutions of consumerism, rearticulating itself in that moment that you pay $4 for a coffee or when you wait 45 minutes in a fast-food drive-thru. Price discrimination is how the hierarchies of capitalist society perpetuate themselves even as they seem to dissolve in the pseudo equities of purchasing power.
The beauty of holding sales on "Black Friday" is that stores know that many price-insensitive shoppers will stay away in order to "avoid the crowds." So you can get revenue from price-sensitive shoppers without sacrificing profits from price-insensitive shoppers.
Tuesday, August 2, 2011
Black Friday (24 Nov 2009)
Economist Arnold Kling has an explanation for Black Friday -- not the Steely Dan song, but the crazy retail sales. He argues that the experience of shopping on Black Friday has been purposely made miserable, so that people who are willing to pay more for gifts will wait and pay more later. In other words, another example of price discrimination working its stratifying magic.