Dear Friends,
The leather cutting story I alluded to in the last story will have to wait a little while. A lot has happened (as one might imagine) this past week, and I want to be able to cover it in some detail. I don't want to forget to tell you that story however, so please remind me some time in January if you remember it.
Anyway, the title of this letter is "The Death of Black Friday (and Cyber Monday)" [insert scary music] and despite that rather dramatic phrasing, the reality is just as concerning. I have seen many videos from creators talking about how the glory days of 80% off in retail stores for a limited quantity of items from the early 2000's has disappeared. Now there have been many recordings of people pulling away "Black Friday Super Discount" labels on retail displays, just to reveal the exact same price for its normal retail.
This is not new, but it has seemed to get worse recently.
I follow a lot of small (and large) businesses emails that I feel reflect similar style products; they sell high quality items, that are useful in some way, but that also have many lower cost and worse alternatives. Usually they have a similar price point per item (or if you were to buy the "usual" set of items together). Lastly, these businesses sell products to similar types of people to those I imagine are attracted by my products.
One thing I noticed this year was that not one of them did more than 25% off (except one company where they had a 50% off item that was not particularly attractive to be able to say "up to 50% off"). I know why this is...
Well technically I don't actually know, but I can make an educated guess...
There isn't enough margin in their products to offer more.
The real trick behind Black Friday of a decade ago or more was that those incredible deals that got you into the store were extremely limited, and often you missed them. You would then settle for a worse deal or would spend way more on the higher cost version, justifying your purchase by saying "But it was too good of a deal to pass up."
That doesn't really track over to the world of Ecommerce well. To create the intended emotional effect, without actually compromising sales dollars, Amazon allows retailers to use simple tools to artificially and temporarily raise their prices, to then artificially discount them back to the same price as before the sale.
This is of course ridiculous, but it reflects a deep part of the human brain. Something in our minds says that getting a $200 item 50% off is somehow better than getting that same item for no discount if it was regularly priced at $100.
In my marketing courses in college we talked about this phenomenon. The simple reason why this happens is our inability to properly analyze real cost vs benefit in quick decision making, and thus rely on pricing as a primary indicator of value, e.g. "if its expensive, it must be good."
This psychology works against small businesses that want to try to price their products in an affordable way all the time.
To compound this issue is the "limited time" nature of the sales. How many of us have seen a Facebook or Instagram ad for a "70% off going out of business sale" for a company that never seems to actually go out of business. The most recent one I saw and clicked on was a leather jacket company that was selling "$1200 coats for 70% off" with a final purchase price of $360. I am an experienced shopper in this industry who gets emails constantly from leather coat suppliers out of Pakistan with their catalogs. I know for a fact that the coat I was looking for cost less than $80 from one of those suppliers. Yet, there I was with a voice in my head going "Thats an amazing deal, and it's too good to pass up." All for a coat I knew was garbage.
There is yet another critical factor that influences this situation, the pandemic and ensuing inflationary spiral.
In my meetings with my CEO group that I talk with, some of my manufacturing friends were seeing raw materials double or triple in price over the course of 6 months. Many of them have had those increases happen multiple times in the last few years. They aren't able to pass that along to their customers, since most people wouldn't accept paying significantly more for the same product or are locked into longer contracts. They are stuck trying to raise prices as much as they can, when possible, but mostly eating the extra expense out of their profits.
This inflation has meant that many small businesses which are stretched thin on profits, are unable to discount their products since they have been artificially deflating their products pricing by not having it rise with their costs. Add on to that the incredible cost of borrowing money, much of which is how many businesses operate on a regular basis, and you get businesses that can't survive discounting their products.
Finally, the timeline has changed. It was part of the Black Friday ethos that the deals began on Black Friday. As time went on, retailers realized that the first to offer their sale, would get the most traffic. This lead to an ongoing arms race to make the sales begin earlier and earlier. Some companies (like mine) benefit from this, in that we actually do need to move the bulk of our Christmas sales away from that very narrow production window between Thanksgiving and a few days before Christmas. We couldn't properly scale up and down fast enough to make all our Christmas orders in that time. So moving those purchases earlier in the month by offering that discount earlier would be the best plan.
The changing timeline also changes the cost of advertising. Putting up ads during BFCM is always expensive. More so in a year before an election as the political ads take up some of the bandwidth. The whole month of November becoming one long BFCM has made that issue extend throughout the whole month.
What does all this mean?
I don't know.
I'm still trying to figure that all out. All I can say was that this BFCM was one of the lowest in sales we have seen in years. I am working on a whole bunch of new marketing ideas so that this issue doesn't effect our whole Christmas season, and more ominously, our First Quarter of next year.
There is an old adage in business, that "one of the simplest ways to stay in business, is to just not go out of business."
What that means practically, is that you do what needs to be done today to stay in business today. Do that everyday, and you can keep on going.
I am hopeful. We have a wide open world out there for us. I have 4 new marketing channels we are working on bringing on.
If you are in the Dallas/Fort Worth/Houston area and listen to iHeart media podcasts, you might hear one of our new podcast spots. If you are near Delafield, Wi be sure to checkout Wingman Gifts where we have a small retail display. These are two early steps into much larger channels that could be a big win for us long term. There are many ways we can expand our marketing, and I am looking at all of them.
In the meantime, I appreciate all of you who have helped support what we are doing here, and if you still need Christmas gifts we would love to help.
Stay tuned for more of these letters in the future!
Ever your servant,
Colin Murdy
CEO/Owner
Murdy Creative Co.
Cell: 414-434-9001
