Wednesday, November 16, 2011

The Case of Christmas Creep and Shopping on Thanksgiving

A few weeks ago I was asked to discuss how it seems that retailers are putting out Christmas items earlier and earlier each year by a local TV station, and by Matt Small at AP Radio.  Of course, the press often chooses one small, silly point you make to include for your 5 seconds of fame.  My better points about the situation were:

Reasons why it happens:
This is a general case of a "prisoner's dilemma" or "race to the bottom".  Stores believe that if they don't do it, everyone else will, and they will lose out.  They also believe that even if everyone else doesn't, they will win by being first.  We are seeing the same kind of leap-frogging in the presidential primaries-- we all agree that this is the wrong outcome, but individual, selfish behavior makes it rational for individuals, but irrational for the collective result. By the way, consumers are just as much to blame- enough of us play the game and will show up whenever the stores tell us we might get a good deal and save $20-- even if that means freezing and getting sick at 3am rather than snoozing in your nice, warm bed.  Not me, however-- but if you see a good deal, grab me one since you're already there. ☺

Additionally, since the Christmas season accounts for as much as 40% of yearly sales, retailers make sure to order their merchandise well ahead of time, so that there are no supply-chain mix-ups.  I believe that this adds pressure as well.  If you have the merchandise on hand, why not put it out?

Reasons why it is a bad idea
However, there are a few reasons why I think that this trend is a bad idea.  First, I don't really believe that putting Christmas items out for twice as long will lead to twice as much spending.  Plus, all of that Christmas merch takes up a lot of space-- there are lots of things that I'd like to buy that stores won't be carrying this week, because of all of the Christmas stuff they have out.  A concrete example is that Walmart clears out most of their garden section for their Christmas items-- they do this so early now that you can't buy supplies for your Fall lime/seeding that one does in order to hope for a few blades of grass to grow the following year.

Secondly, as this NY Times article mentions, some retailers are thinking of opening just a little earlier for Black Friday-- Target, Khols, and others on Midnight Thanksgiving.  Walmart has one-upped them by saying that they will open at 10PM on Thanksgiving.  In some people's opinions, this is a bad idea.  I agree! Why?  Sadly, the best answer I can give is that it violates my sense of tradition.  Christmas largely has its power in today's secular west because of "Christmas Traditions", after all.  Black Friday has become a tradition, as well, and I firmly believe that forcing people out of stores, and giving an almost universal day off for Thanksgiving is an important part of the season.  Pretty soon, Thanksgiving and Black Friday will both seem like "just another day"-- how long will it be before Christmas is just another workday, as well? (And then where will 40% of your revenues come from, eh Walmart?)

-Dr. B

PS:  Another interesting issue I'd like to know about is, with Christmas goods out for so long, how do prices fluctuate during the season?  Economists often discuss this issue in terms of the so-called "Durable Goods Problem".  This phenomenon suggests that we all know that producers and sellers often charge higher prices for goods when they are first put out, but lower prices later if you wait.  Think of iPhones, day after Christmas sales, the latest model of car, computer, or clothes.  The simplistic version of the durable goods problem suggests that this won't work if everyone is rational, because we will ALL wait instead of paying the high price today.  In reality, there are (at least) three types of people: Early adopters, "normal" people, and budget-conscious planners.  So, some people get a thrill from blowing their money on the latest gadget, some buy it after the first price drop, and some people buy the used, older version from the early adopters on Craigslist!  Long story short, I wonder if prices on Christmas goods follow this same pattern?

1 comment:

  1. I am a budget conscious patron of Craigslist. It is my way of "recycling." I get a special thrill when I buy something for far less than "retail", plus I’m repurposing an unwanted item. Additionally, I am reducing the impact on the environment by not buying a new manufactured good.