Ha ha Black Friday Shoppers: Those Deep Discounts and Door Busters Might Not Be As Good As You Think

It seems that retailers are full of dirty tricks when it comes to Black Friday.

Here's how it works, according to one industry consultant describing an actual sweater sold at a major retailer. A supplier sells the sweater to a retailer for roughly $14.50. The suggested retail price is $50, which gives the retailer a roughly 70% markup. A few sweaters sell at that price, but more sell at the first markdown of $44.99, and the bulk sell at the final discount price of $21.99. That produces an average unit retail price of $28 and gives the store about a 45% gross margin on the product. 

So with a 70% markup you can't help but make money on the sweater. It might be a "door buster" that would be advertised as "more than 50% off!" even though the company still makes a 45% margin on the thing. This trick is especially insidious:

Another tactic involves raising selling prices ahead of the holidays before the discounts kick in. In an analysis for The Wall Street Journal, price-tracking firm Market Track LLC looked at the online price fluctuations of 1,743 products in November 2012. Prices climbed an average of 8% in the weeks leading up to Thanksgiving for 366, or about a fifth, of the products; the items were then discounted on Black Friday. Toys and tools had the biggest pre-Black Friday price increases—about 23%.  

So the 20% off sale is actually minus a 23% price hike in the months before the toy or tool was sold? You add to this all of the other tricks retailers use like:

1. Making roadblocks out of merchandise so you grab some when you dodge out of the way.

2. Putting one item for like $250 next to the similar item that costs $450. The person picks the $250 item because they think they are getting a "deal" when compared to the $450 item. Imagine if the $250 item was marked down even further. What a deal you are getting when compared to the $450 item.

3. Selling a super cheap TV and then marking up the price of HDMI cables that you need to watch the TV in HD. There always seem to be lots of Monster cables (the most expensive brand) around but not a lot of generic cables when I went I bought my TV.

4. Putting impulse buy items near the checkout stand so exhausted shoppers put "stocking stuffers" in their carts in place of better judgement. I noticed a DVD bin full of $5 DVDs right next to the express checkout line in Wal-mart the other day. I could see more than a few people just grabbing a title that they probably won't watch and adding it to the few items that they were buying.

5. Putting the higher margin stuff to the persons right as they enter the store. I notice this in the Wal-mart next to my workplace. You are generally moved to your right when you enter the store. In front of you as you enter is clothing but there are racks of discount T-shirts kind of forming a road block so you actively need to go to go to your right where the jewelry department and the coats and such are located.

In Costco you have to travel through the electronics section before you can get to the rest of the store. In fact you have to travel nearly the entire length of the store before you get the to the cheap vat of pretzels or the 4 pack of Ben and Jerrys Ice Cream.