If you’ve ever contemplated getting up at 3, 4, or 5 am only to brave large crowds to fight over scarce merchandise, well, think again. Instead of looking into census data this Thanksgiving, we thought we’d look at more “fun” data, specifically, Black Friday shopping habits– and whether or not they make sense.
Recently, several articles have talked about whether or not it’s worth it to brave the early morning ritual, especially given the widespread use of online shopping and success of “Cyber Monday.” Why go out when you can line up your shopping cart in your PJ’s, and hit a button to order and send? Moreover, especially since the Great Recession, many of the best times to go seasonal shopping haven’t been during Black Friday. Some years, when volume lags below expectations, retailers offer even bigger discounts later in the season. While it’s impossible to know for sure when to get the best deals, there are a few things we do know.
First, I went online to several large retailers to see what sales they were promoting for the day. I found several items popular amongst multiple retailers, such as an iPad, Beats headphones, tv’s, and an Xbox One. Prices were largely similar across retailers, and on average were discounted about 21-23% from regular prices. (Keep in mind these are on big ticket items- Beats headphones can be on sale for more than 50% off, but an Xbox One has a max savings of 17%. While that’s still significant given the price of an Xbox, it is likely that smaller-ticket items will have less than 20% savings.) IBM reports that last year the average amount spent on Black Friday was $120 ($200 for consumer electronics) — meaning a typical shopper saved approximately $25 according based on our estimate of average Black Friday discounts.
But what about those things that detract from Black Friday– how do you account for the “cost” of going? The answer to an economist may be obvious, but to others, probably not: your time, in the classical sense, is worth money. Every minute you spend shopping, watching tv, or generally spending your leisure time, you are not spending time on work. In theory, the time you don’t spend on work is costing you the money you could be making if you were working. Hence, time is money. Frankly, however, our behavior doesn’t seem to to imply that people believe their time is worth much; people drive 20 minutes to get a slightly better deal on gas, spend days repairing a car when a mechanic could fix it in under an hour … or shop for hours to get the best price. A person earning $25,000 a year, working 50 weeks for 5 days a week and 8 hours a day, makes $12.50 an hour. By the same logic, someone making $50,000 a year nets $25 an hour, and someone making $75,000 earns $37.50 an hour. If people actually valued their time at these rates per hour, it wouldn’t make sense for them to spend hours getting to the store, shopping, and getting home on an early Friday morning. Basically, if someone saved $25, but spent 3 hours (at $12.50 an hour) shopping, they effectively lost $12.50. If you spend $200 (the average electronics bill), your net savings are only $4.50.
Check it out for yourself: at what point does it make sense for you to go out on Black Friday?
(Just slide the amounts to the right and left to estimate how much you believe your time is worth, how much you typically spend, etc.)
What’s worse: this doesn’t account for basic costs like gas and mileage, or more rare costs such as getting into a wreck because you’re too tired, or the occasional (but real) occurrence of injury due to in-store conflict like trampling. It doesn’t account for psychic costs like aggravation with other shoppers or crowds, or include the fact that actually being leisurely on vacation time– instead of spending it at a crowded store– can make you more productive at work. Finally, it doesn’t allow for the fact that very often, the items that Black Friday shoppers most want are taken by the first few shoppers, and the items with the biggest savings are then no longer available. (As an aside: we could build this into the model with relative ease- and you could too! Contact us if you want more information on how we built this.)
Of course, many like the ritual– and it’s hard to quantify happiness associated with that. So even if you value your time anywhere close to your wage, you could still value the time with your family (or away from them) more than that time.
Whether or not you go out on Black Friday is of course your prerogative. But remember that your time is valuable- and frequenting your local stores could save you time and effort. Happy Thanksgiving!