'Tis the season, you'll hear almost daily from now until 2017. Colorful LED lights hanging above garages shine against fresh snow. The Jones' have fancy projectors with lights dancing across their windows and garage doors to set themselves apart. And, of course, let's not forget the time-honored tradition of losing our minds for sales on both Black Friday and Cyber Monday. After all, what better way to celebrate our southern neighbor's holiday than by giving their economy a nice jolt in the consumer discretionary department?
Of course, with Christmas coming up and the expectation of gifts, work parties to dress up for, vacations to pack for and even charities making a last year-end push to get needed donations, spending seems to be the theme. It is the socially appropriate time to open up your wallet, so why fight what is natural? Then, on Christmas Day, when gift cards are fished out of stockings and cash is revealed between covers of Christmas cards, Boxing Day comes around to help you spend every last bit of those monetary gifts as quickly as possible!
What has happened is quite a dramatic economic cycle. One where retail companies can make up to half of their entire year's earnings within the span of just a month or two. In fact, if you take even a general basket of publicly-traded discretionary retail companies (think non-grocery), you can measure just how important these couple months are.
The chart above shows the "seasonality" of the general consumer discretionary index based on the last 20 years. Seasonality refers to the average trend at any point in time based on historical movements. What it shows is that since last May, retailers have been sitting ducks! Only since early October have company shares traded higher due to perception, earnings and forecasts. And these companies are aware of the trend, too, which is why planning for the run-up to the holiday season is done so well. Seasonal workers, merchandising, inventory and sale planning is done to a tee.
The psychology of the general populace is one that is much more easily taken advantage of, thanks to general mood. You'll see "UP TO 50% Off" written on signs for Black Friday in an attempt to generate hype and pull customers in. Keep in mind, for that statement to be legal, literally only one item in the entire store needs to be 50% off. The rest can be regular price, and they can still legally put those signs up. It is what lures customers in to buy things that are not actually a deal and generate massive sales.
Am I saying don't buy anything on the retail event of the year? No. In fact, I personally am planning on checking out a specific item next weekend. But my advice is make a small list (less than 5 items) that you are going to be buying regardless of whether it's on sale or not before the end of the year. If you just moved into a new apartment and need a TV, that would count. If your winter jacket from last year ripped and you are in need of a new one, that counts, too. If you are looking for a Christmas gift that you have a great idea for, that could also count. Then, plan your route (whether it be in a mall or on the internet). Search to see if the store you want to get the item from has information about Black Friday or Cyber Monday sales ahead of time. Trying to find their sales last year might help, too. Then, on the day of, only buy the item(s) you had listed out if a noticeable discount (say, more than 15%) applies to it.
The logic here is that if there is no substantial discount, you can remind yourself that often, Cyber Monday deals will apply for a whole week after the chaos has settled. You can then stroll in after the crowds have left without thinking someone is going to snatch the last size medium right out of your hands.
Oh, and if you look closely at the picture in this post, you'll see that yes, there are a pair of scissors being sold somewhere for €29 or over $40 simply because they have an integrated nutcracker. Don't be the shopper on Black Friday that walks into a store and buys that for full price. Or any price, really.