Black Friday has become a North American retail phenomenum. The premise is simply; retail revenues for the calendar year exceed expenses after black Friday.
From an accounting stand point retailers profit and loss statements move from red ink (losses) to black ink (profits). Typically in the retail business profitability depends on robust holiday season sales.
In this context, I the holiday season is the annual public buying surge that occurs during November and December. Sales during other months help keep the lights on and pay the rent, holiday sales spell profit.
Marketing Brilliance
Years ago, astute U.S. retailers noticed the biggest increase in sales started after thier Thanksgiving holiday. This created an interesting marketing opportunity.
Given consumers obvious proclivity to increase thier amount of shopping around this time of year; what a great time to give them added incentive. That is increase the percieved value of shopping right after Thansgiving. Hence Black Friday sales.
So were born, Black Friday sales. It is important to remember the merchants are not giving away the merchandise and the goal here is still profit.
Driving Volume
Obviously inreased volume allows merchants to lower margins, assuming they move more stock profit can be constant or depending on the volume increase, even better.
Remember there is a base operating cost retailers pay regardless of sales volume. Once the volume needed to covered those costs is reached the rest is at a much higher margin.
Thus enciting consumers to buy large amounts in a short period is a smart strategy. Black Friday histeria is a tactic to do just that.
