Black Friday: A Hoteling Story?

Black Friday has a mixed legacy for Americans. For some it is the best shopping day of the year, a time to knock out Christmas shopping with one blow. For others it is the ultimate example of capitalism driven to excess, as is often visible when news outlets report on a doorman trampled to death by customers. But how do firms view the tradition?

According to a MasterCard analysis of consumer spending habits, 70% of spending on Black Friday occurs in the first two stores visited. Furthermore, consumers spend on average 50.7% of their gift money in the period from Thanksgiving to Cyber Monday. These two facts are crucial to understanding firm behavior during the Thanksgiving season.

This story appears reminiscent of the hoteling model, albeit not a perfect comparison. Consumers will spend their money at the first shop they go to; therefore, by opening earlier, firms can increase their market share. Because there isn’t an equilibrium position, this “retail arms race” will likely continue indefinitely, to the disgust of some consumers.

http://www.forbes.com/sites/clareoconnor/2013/11/28/heres-the-real-reason-stores-are-open-for-black-friday-sales-on-thanksgiving-day/

3 thoughts on “Black Friday: A Hoteling Story?

  1. Is there a point where early is too early? If the firm opens before customers begin to come, the firm will lose money opening a store and paying employees to be there. However, perhaps the tradition of black friday causes consumers to flock to the stores no matter what time it opens.

  2. A store could increase the odds of people showing up at an earlier time if they put higher discounts on select items. By drawing in customers to get a chance at an inexpensive tv, this article states that the shoppers are more likely to continue buying items that might not be on sale. In this Hoteling Model is there a large enough cost to switching stores that consumers will spend the extra cash overall?

  3. Charlotte raises a good question. The recent phenomenon of retailers opening and beginning their sales on the night of Thanksgiving has caused a consumer backlash. People have reprimanded big retailers for defiling the sanctity of Thanksgiving. But if opening stores on Thanksgiving produces higher sales, what is stopping the retailers?

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