As a personal finance writer and editor, I have watched many a Black Friday with a mix of fascination and horror. For some of those years, I was involved in the packaging of Black Friday and Cyber Monday, as AOL ad sales people pushed us to develop a series of posts, videos, and photo galleries leading up to and culminating in the event, including one year when we asked freelancers across the country to report “live” from (presumably) Wal-Mart and Target and Sears lines in their own hometowns.
On one site I worked on, we actually had a category we created just for leaked Black Friday ads. On the other end of the Black Friday transaction, I listened to analyst conference calls where CEOs and CFOs reported the results from creating those frenzies among customers.
So when I say “what I have learned” it is with considerable context and study. What I have learned is this: for consumers, nothing good results from thinking of shopping as a competition.
The house always wins
You know the mantra for gamblers and those in the business of gambling entertainment? “The house always wins.” It's the concept that the games are not quite rigged, but calculated very, very shrewdly to ensure that the house (the companies that are providing the games, hotels, dealers, and the plentiful free drinks) will come out with a profit in the end. If $100,000 is gambled in a day, you can bet the house will end up with enough to cover its salaries, rent, liquor costs; enough to cover the glittery lights and the cocktail napkins and the piped-in music, the bells and the whistles, and then some — probably more than $50,000 of that. If anyone goes home a winner, chances are, next time they'll end up in the hole.
Even those temporary “losses” for the house are expected to result in a hunger on the part of the consumer to come back and try again. He'll tell all his friends that he won and he'll feel warm and fuzzy feelings about the establishment — “goodwill.” When he comes back and loses, he'll still be happy, remembering that time he won!
Think of competitive shopping as gambling…against a mafioso
When shopping is the sort of thing you are willing to miss sleep for (or pitch a tent for, or drive hours for, or stand in crazy-long lines for), it's not just comparable to gambling. It's comparable to gambling when the “house” is run by the mafia. Think Casino. Think Ocean's Eleven. I don't want to suggest that the management of a department store is like the mob; what they're doing is legal and you're complicit in your own snookering. You willingly walk into a situation in which (were you honest with yourself) you knew that you'd end up spending money on things that were not on (insanely great) sale. In fact, even some of the things on insanely great sale are things you just don't need.
Take the waffle iron. Nearly all the coverage of this year's Black Friday mentioned the great buys on waffle irons to be had at Wal-Mart: only $2! It would be hard to argue that this is not a screaming good deal. Emphasis on “eeek!” The frenzy got a bit out of control, with some shoppers picking up armloads. And I don't want to judge people based on a cell-phone video so I'll just make a blanket assumption about all people everywhere: Do they use waffle irons? I mean, I do, but I already have a perfectly serviceable waffle iron, picked up at a garage sale for $1. Or maybe even $2, I can't remember. I would be willing to guess that many customers did not buy the waffle iron because they wanted to make waffles, or wanted to give it to their waffle-making relatives whose current appliances had just suffered a terrible waffle iron accident. They bought it because it was an amazing deal.
What else did those customers buy? Lots of things, if anecdotal evidence is any guide, and if store reports can be trusted (I believe they can). It may not be bait-and-switch; it's bait-and-overfeed. After several years in the low-$40s, Thanksgiving weekend sales jumped up to over $50 billion for 2011, with an average of about $400 per shopper. The thing in most shopper's bags was not appliances or (umm) pepper spray, either; clothing made up more than 50% of women's purchases over the weekend, while purchases made by men (which averaged significantly higher than those made by women) were mostly consumer electronics. There's no way of knowing for sure, but most news interviews I heard over the recent holiday shopping extravaganza indicate that many consumers were shopping as much for themselves as for their gift recipients.
You save money by not spending it
I've said it before (and it's been said by others): there is only one way to save money, and that doesn't happen in a mall or in an online shopping cart. You can't save money if you're spending money. You save by not spending. My parents say it more folksy-like: “I'll tell you how to save even more money!” (than whatever amazing savings a circular or television ad is trumpeting — don't buy the thing).
If you walk out of a store adding up all the money you “saved,” you're only fooling yourself. Sure, if you bought those things at the original retail price, you would have spent a lot more. But I'd be willing to bet that most of us don't go into a mall store with a list and a commitment to spend whatever it takes to check everything off; no, most of us go into a mall store with a dollar limit and try to get the most stuff for that money. When we shop competitively, with all those “savings,” we often increase the limit bit by bit, telling ourselves that we would have spent so much more if the prices were higher! Oh, what we have saved!
It's a rationalization (some call it an ethical trap): a way of convincing ourselves it's okay to buy things we probably don't need.
How to avoid the competitive urge
What can you do to stay out of the competitive fury that will surely end up costing you money, while still (sometimes) taking advantage of great deals? Here are a few things to try:
- Make a list of what you want to buy before looking at any holiday circulars or sales emails. Stick to it.
- Consider your expenditure of time waiting in line (both at the door and at the register) as well as your savings of money. Maybe you could have spent that time making gifts, or spending time with your family, which they might appreciate more than the extra gifts you were able to afford at that door-buster event.
- Resist the newly developed desires those sales develop in you. Every year when Cyber Monday rolls around, I often have to shut down Facebook, as I watch all my friends “liking” great sales or see some of the businesses I follow advertising deals on fancy boots or bike bells or pretty sweaters. I had been happily living without desiring those things, until I saw the sale!
- Recycle the ad pages without looking at them. I have to do this; maybe you're stronger than me, but the only way I can avoid the urge to spend money I can't really afford is not to see the great deals. I open my Thanksgiving morning and Sunday papers and immediately put all the ads into the recycling bin without even glancing at them. It's the best way to stop the crazy want-monster.
- Pay cash for all your holiday shopping. Not debit, but cash. If you withdraw cash from the bank and take it to the mall, you'll avoid going over budget ,and you'll know you have the money. Even when we use our debit card, studies have shown we are likely to spend more than we can afford. If you're shopping online, you can't use this trick, but you can use your debit card, which is a step in the right direction.
Finally, pay your bills right before you intend to shop. Not only will this perhaps eliminate your ability to shop (it does for me, thanks to my cash-only rule), but you'll be filled with the reality of your financial situation. It's hard to forget you owe twice as much this month for your gas bill and don't really have money to spend on pretty new boots, if you've just paid it!
Author: Sarah Gilbert
Sarah is a blogger by trade and a finance geek at heart. She cut her teeth on her first Excel spreadsheet full of financials at the tender age of 21, when she began her investment banking career in First Unionâ€™s Loan Syndications group. She went on to get her MBA from Wharton, work at Merrill Lynch and fall in love with analyzing company strategy and endless rows of numbers. She got into blogging as a marketing strategy and the blogging took. She now is a freelance financial and (award-winning!) literary writer, working in between baking bread and finding socks for her three little boys in her beloved 1912 Portland, Oregon, home.
Sarah's even-more-personal blogging about being an Army wife, parenting, food, biking and life can be found at urbanMamas and Cafe Mama.