💵 Black Friday: A $273 Bn Shopping Festival!
E-commerce companies want nothing more than to increase sales volumes. And one of the ways they have done this is by cashing in on the world's biggest shopping festival. ReadOn to know more about it.
Hear, hear! This one is for all the shopaholics out there:
All brands from Nykaa to Tata are offering bumper discounts right now. Go, grab all you want before they go out of stock!Â
What's the party about, you ask?
Well, because today is Black Friday (or as Nykaa likes to call it 'Pink' Friday).Â
Wondering what it is and why it gets you discounts? Well, ReadOn to find out!Â
âš¡The Story of Black Friday
Black Friday is an American shopping festival. And it's not just any festival, it is the shopping festival of the US.Â
Here's a glimpse of how crazy this festival gets:
This craziness sometimes also leads to injuries and even deaths. This chaos is one of the main reasons that the day has come to be known as "Black Friday".
But why is Black Friday so important for discounts and sales?Â
Well, Black Friday is the last Friday of November and comes after Thanksgiving (an American festival) and it officially marks the start of the Christmas season for the US.Â
And Christmas is like Diwali for the US. It's their main festival and they need to buy lots of gifts and decorations (unlike in India, giving someone an envelope full of money isn't really an option).Â
So, lots of shopping needs to be done and most people begin this on the Friday after Thanksgiving.Â
Retailers soon noticed this and began offering discounts to people on Black Friday to increase their sales.Â
And it worked! Black Friday saw 155 million shoppers in 2021 who shopped goods worth $30 to $40 billion.
This is another reason how the day got its name.Â
You see, because in the early days, retailers would be seeing losses in their books (marked in red) but one Black Friday shopping spree would put their books back in Black (or profit).Â
Because of the insane numbers that Black Friday witnesses in the US, this festival has made its way to India (one of the world's biggest markets for e-commerce firms) as well.Â
But how does giving such insane discounts make sense economically for brands?Â
💵 The Economics Behind Black Friday
Well, there's more than meets the eye…Â
Despite the insane discounts you see on e-commerce websites, the average discount across all products is not more than 20-25%.
And that super-insane, can't-believe-my-eyes! discount you see on some products is because sellers want to liquidate their leftover stocks.Â
That's one reason why Black Friday sales have taken over India. It helps sellers get rid of unsold stock from Diwali and make space for their new winter collections.Â
Also, a fair amount of deceit is involved in these sales. The MRPs of some products are hyperinflated so that even a 5% discount seems like a 25% discount.Â
But, these sales also involve a significant cash burn for e-commerce marketplaces. How?Â
You see, marketplaces have to convince sellers to give discounts for around a whole week. And they do this by promising to return to sellers whatever money they lose due to the discounts. That's how you get almost all the sellers on a platform to agree to give discounts.Â
But usually the increased sales make up for most of the lossesÂ
So, Black Friday has merrily become the candy that sellers across the globe use to attract more sales!Â
Only difference? Different countries have given different names to this festival.Â
China has the Singles Day Sales on November 11. Chinese e-commerce platforms like Alibaba and JD.com offer attractive discounts and last year they set a record of $139 billion of sales, out of which Alibaba alone recorded $76.1 billion worth of sales.Â
The Gulf countries have the White Friday sales, Mexico has El Buen Fin sales.Â
But now the question is how sustainable are these sales?Â
Not only do they encourage overspending on the consumers' part, they also incur some losses for marketplaces and retailers.Â
And given the fact that most of these marketplaces are loss-making (Flipkart, Nykaa, Myntra and even Amazon India), they may not be able to sustain these sales for much longer.Â
But now that customers are used to such sales, these e-commerce marketplaces are in a tough place. Dropping such sales could mean losing out on customers.Â
So, either way it's a lose-lose situation for them. One way to go about this would be to gradually reduce the crazy discounts they offer.Â
But what do you think is the future of these sales and e-commerce platforms? Will they survive?Â
âš¡ In a line: Black Friday sales have now reached India because e-commerce platforms want any excuse to give discounts to get customers.
💡Quick question: Do such deep discount sales make you overspend?
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