Shoppers may want to think twice about getting up at 4 a.m. on Friday to hit major retailers because their one hour Black Friday only deals may be a fabrication.
It is commonly perceived that Black Friday discounts are the result of retailers stocking up on goods and marking down the ones that don’t sell, taking a hit to their profits.
But according to a recent article in The Wall Street Journal, big retailers are working backwards with suppliers, starting with high prices that, after markdowns yield the profit margins they want.
These faux discounts may make some question standing in line for hours to get a deal on a TV or fighting through a crowd for a sweater that’s marked at more than 40 percent off, but was never meant to sell at its $49.99 staring price in the first place.
JCPenney tried to move away from this practice under former Apple Inc. executive Ron Johnson’s "Fair and Square" everyday low pricing campaign. But new CEO Myron "Mike" Ullman has decided to play the game this holiday season to stay competitive.
In a conference call with analysts last week, Ullman said JCP is restoring the initial markups that are necessary to return to a promotional department strategy.
"The environment, as you know, is very aggressively promotional, and we must and will compete to win," he said. "That means initially marking up our goods to sufficient levels to protect our margins when the discount or sale is applied."
Another tactic involves raising product prices ahead of the holidays before 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 eight percent in the weeks leading up to Thanksgiving for 366, or about a fifth, of the products; the items were then discounted on Black Friday. According to Market Track, toys and tools had the biggest pre-Black Friday price increases of about 23 percent.
(Staff writer Michelle Corbet can be reached by email at email@example.com or by phone at 505-1215. To comment on this and other stories in the Log Cabin, log on to www.thecabin.net. Send us your news at www.thecabin.net/submit)