All Hail Black Friday: The Business Behind the Biggest Shopping Day of the YearPosted November 17, 2015 | By csponline
While Thanksgiving is commonly reserved for turkey dinners and evenings with family and friends, a significant subset of consumers — 95.5 million in 2014 — focus on honing their shopping lists for the following day’s shopping free-for-all: Black Friday. There are both complex historical precedents and shrewd business strategies behind this retail holiday, and the marketing industry plays a central role in keeping this shopping tradition alive.
The History of Black Friday
There is no exact date marking when the day after Thanksgiving became the start of the holiday shopping season, but most experts agree that it began in the late 19th century, when store-sponsored Thanksgiving parades were common during the month of November. At the end of these parades, Santa Claus would arrive and the holiday season would officially begin. Because retailers generally agreed that the season of spending didn’t start until after Thanksgiving, they didn’t advertise holiday sales until Friday. When they could finally market their holiday products, they made a significant push toward getting customers to purchase gifts.
Just because they waited until after Thanksgiving didn’t mean retailers were always patient, however. In 1939, the Retail Dry Goods Association lobbied President Franklin Roosevelt to move Thanksgiving up a week so that it was earlier in the month and the shopping season was longer. Fearing that a later date would negatively affect the economy, Roosevelt moved the holiday from Nov. 30 to the fourth Thursday in November, regardless of the date. Businesses got their wish: The shopping season was one week longer. Congress made it official in 1941.
There is more than one theory behind how Black Friday got its name. One of the most popular is that retailers used the day’s high volume of sales to “get out of the red and into the black” in terms of profits. However, Mental Floss points out that many researchers attribute the name to mid-1960s Philadelphia. Because that Friday falls between Thanksgiving and the traditional Army-Navy football game (which takes place in the city), crowds of tourists were in town. While this was beneficial to retailers, city officials and residents found it to be an annoyance. They began referring to the annual day as “Black Friday” to express their frustration, and that’s when the name was born. However, storeowners downplayed the negative connotation by introducing the “accounting angle” in the 1980s.
Black Friday Today
As is evident by today’s massive sales numbers, things snowballed from there. As retailers realized that big discounts meant big crowds of customers, they began putting items up for sale on the morning of Thanksgiving, and today customers may receive emails about specials days or even weeks before Black Friday. While the most shopped for items are electronics and toys, prices drop considerably for every type of product, from housewares to clothes. Many retailers open their doors at 5 a.m. or even earlier, and shoppers line up outside, anxiously hoping to get “doorbuster deals,” which are discounts that only apply to a certain amount of customers on a first-come, first-served basis. Most businesses also post Black Friday ads and offers online beforehand so that customers can learn about sales and plan their shopping trips. Others do things differently, waiting until just before doors open to release Black Friday deals to the public. The logic behind this is that customers will await the announcement and create buzz.
Part of Black Friday’s popularity can certainly be attributed to the structure of the Thanksgiving holiday itself. Most consumers have the day after Thanksgiving off from work (unless they work in retail), and states such as California, Florida, Indiana, Minnesota, Nevada and Texas have made it a public holiday. But the jury is still out on whether Black Friday can truly be considered the biggest shopping day of the year. Most retailers don’t need it to make a yearly profit. They generally accrue enough profits throughout the entire year. For smaller businesses, however, Black Friday and the big sales numbers that come with it considerably bolster annual profits. Black Friday is generally one of the top six or seven retail days of the year, but the days immediately before Christmas are also big sources of holiday revenue. In terms of customer traffic, Black Friday is the clear winner.
A Christmas Creep
Because the actual length of the shopping season varies (the date of Black Friday can vary from Nov. 23 to Nov. 29, while Christmas Eve is always on Dec. 24), retailers have started slowly moving up their Christmas marketing efforts. This merchandising phenomenon is known as the “Christmas creep.” The term was first used in the 1980s, when the increase in the commercialization of Christmas became obvious. It seems that, every year, the Christmas season begins earlier and earlier in the year. Of course, this means that retailers have more time to sell. They take advantage of the Christmas shopping that occurs before Thanksgiving.
It’s clear that advertising for holiday goods begins long before the season itself. For example, the David Jones Limited department store begins selling Christmas merchandise at the start of September. In 2002 and 2003, the creep really took off; retailers like Walmart, J.C. Penney and Target began Christmas sales in October. In 2006, the National Retail Federation reported that 40 percent of consumers planned to start holiday shopping before Halloween. And let’s not forget Christmas in July — organizations carry the spirit of the season into summer and hold charity campaigns, while retailers push sales and specials on this “marketing holiday.”
But there is an important question on the minds of marketing teams: How do promotions like these affect Black Friday? The answer may lie in how retailers utilize Thanksgiving Day. One of the major cogs in the Christmas creep machine is the choice to begin sales on the holiday itself. According to ShopperTrak, Thanksgiving Day store visits grew 27.3 percent from 2013 to 2014. Last year, Staples opened at 6 p.m. on Thanksgiving, while Dollar General began sales at 7 a.m. Target and Walmart, both of which draw large crowds for their doorbuster deals, are open on Thanksgiving as well to begin Black Friday sales. Other big-name retailers like Best Buy and Toys R Us opened their doors at 5 p.m., with Macy’s opening an hour later. An impressive 41 percent of shoppers told PricewaterhouseCoopers that they plan to shop on Thanksgiving, whether in stores or online. In 2014, Walmart reported 22 million shoppers on Thanksgiving, and Macy’s topped 15,000 shoppers at its flagship New York City store alone. While Thanksgiving shopping pulls some sales away from Black Friday, profits are profits and retailers roll out discounts to attract the shoppers who are willing to venture out on the holiday.
And there is a real incentive to do so. The 2014 holiday shopping season was expected to increase to a total of $616 billion, up from $602 billion in 2013. The average American shopper was forecast to spend more than $800 throughout the time period, with 73 percent of that amount spent on gifts. Sales are so significant that the money supply in U.S. banks is annually increased for Christmas shopping. As the demand for discounts continues to rise, retailers will likely find more (and earlier) ways to market to their customers and get a larger piece of pre-holiday profits.
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