BUSINESS
The Myth of the Black Friday Deal
Updated Oct. 8, 2012 10:59 a.m. ET
After crunching two to six years' worth of pricing data for a number of typical holiday gifts, The Wall Street Journal has turned up the best times to go deal hunting — and they almost never involve standing in the freezing cold all night.
It turns out that gifts from Barbie dolls to watches to blenders are often priced below Black Friday levels at various times throughout the year, even during the holiday season, and their prices follow different trajectories as the remaining shopping days tick down.
Watches and jewelry, typical last-minute quarry for well-heeled shoppers, get more expensive as the season progresses, according to Decide Inc., the consumer-price research firm that gathered and analyzed the data for this article. Blenders, which might sit around for months if they aren't bought in the holiday window, get much cheaper at the end.
The results reveal a lot about how retailers plot pricing strategy ahead of the year-end shopping frenzy that can account for a fifth or more of their sales. They also highlight how the industry has managed to use more sophisticated technology to turn Black Friday into a marketing bonanza by carefully selecting items for deep discounts while continuing to price broader merchandise at levels that won't kill profits.
"In the old days, all of the great deals were on Black Friday, but now you see some great deals on Black Friday and lots of offers throughout the season," says John Barbour, chief executive of electronic-toy maker LeapFrog Enterprises Inc. and a former Toys "R" Us Inc. executive.
The fast rise of online shopping has presented a wealth of data for researchers looking to uncover retailers' strategies and pinpoint when prices are lowest. Decide aims to use that data to tell its member consumers whether to buy any of a number of products now or wait until later. The company is run by veterans of Farecast, a service that tried to predict whether airfares on specific routes were about to go up or down and was bought by Microsoft Corp. for a reported $115 million in 2008.
At the request of The Wall Street Journal, Decide tracked the prices of products ranging from flat-screen televisions to Barbie dolls each day for at least two years across a number of retailers and e-commerce websites. The results included the prices at more than 50 retailers, including Amazon.com Inc., Wal-Mart Stores Inc. and Macy's Inc.
Decide didn't track in-store prices, which differ from market to market. As a result, its findings don't reflect the "door buster" specials offered during Black Friday on limited quantities of items found only in stores. But online retailers like Amazon have become more aggressive about competing for Black Friday business, so the data still give a good picture of broader trends in pricing.
Prices for some gifts items are lowest early in the holiday season—meaning now—before retailers begin to gradually raise prices. But Decide's tracking of prices for at least two years produced some surprising conclusions about the best times to buy on average.
(Periods of lowest price identified in this article, based on averages over at least two years, differ from those in the chart, which is based only on 2011.)
Decide tracked the price of a Citizen men's black watch from 2008 through 2011 and found that the best time to buy it was early March, when the watch sank to $350 from its $600 list price. The average price for the watch on Black Friday and Cyber Monday was $379.
If you missed that window, there is still no reason to wait for a bargain. Categories like jewelry and watches become pricier throughout the months leading up to Christmas, according to Decide's data, which showed a steady incline in prices from October through December.
Ugg boots, typically a winter item, also became pricier as the holiday season progressed. Decide's data show the best time to buy Uggs during the holiday-shopping window is in September or October. The average price for a pair of women's "Classic Cardy" Uggs during those two months was $85, down from the $159.95 list price. On Black Friday and Cyber Monday, the average price jumped about 59% to $135 and $137, respectively.
Hot items like flat-screen televisions also become more expensive closer to Christmas, Decide's data found. The best holiday-season time to buy a flat-screen television is in October, says Mike Fridgen, Decide's chief executive.
The average price of a Samsung 46-inch "Professional" LCD television was $1,159 in October, according to Decide. On Black Friday, the same TV's average price was $1,355, the data found.
The same goes for almost any hot item and popular toys.
Buying early could help you snag an item before prices rise as supplies become tight.
The price of a Sesame Street Elmo plush toy increased 31% to $17.78 on Black Friday from its average in September and October, according to Decide's data.
The late-season price increases for toys that turn into hits can be dramatic. Ron Brawer, a partner at toy maker Maya Group Inc., recalls that his $29.99 Orbeez "Soothing Spa" toy was sold for as much as $90 during last year's holiday season as online retailers raised the price when supplies became limited.
"It was crazy," Mr. Brawer says. "They spent three times as much for something than if they would have bought it three weeks earlier."
For other items, it pays to wait until closer to Christmas. The mid-December price of a KitchenAid Artisan Stand Mixer, for example, dropped nearly 20% from the month before, according to Decide data.
Retailers will generally look to reduce inventory levels on items they overestimated or bought too much of in the days before Christmas, rather than having to resort to an even steeper discount on Dec. 26, says Arnold Aronson, a former CEO of Batus Retail Group, which in the 1980s was the parent company of department stores Saks Fifth Avenue, Marshall Field's and Kohl's.
The retail veteran, now managing director of retail strategies at consultancy Kurt Salmon, says chains have much more insight into margin and sales than they did in years past because of technology, and they're using it to carefully craft Black Friday deals that maximize the promotional benefit without wiping out profit.
"They have to provide value on the day, but they engineer it in a way that they can control their own destiny rather than fall victim to it," Mr. Aronson says.
Black Friday may be the best time to find incredibly deep discounts on some select items. But quantities are often limited, making the odds of getting those items slim.
Retailers use the offerings to get people through their doors, even at the cost of losing money on the sale, in the hopes of drumming up business for other products that aren't priced at such steep discounts.
The deepest discounts at Sears Holdings Corp.'s Kmart and Sears stores are still offered on Black Friday, says Ron Boire, chief merchandising officer for Sears Holdings. But like other retailers, Mr. Boire said, both stores will tag many items at full price that day.
Black Friday can offer fleeting bargains on some highly prized items, too. The price of Apple Inc. 's iPad rarely moves up or down. But last year on Black Friday, Apple offered a $41 to $61 discount on its tablet computers depending on the model.
Apple declines to comment on whether it will have a similar sale this year.
Videogame systems like Xbox also showed their biggest price drops during Black Friday and the following Cyber Monday, resulting in more than $100 in savings, according to Decide's data.
But those are exceptions to the rule. The transparency created by online shopping has made pricing much more volatile, says Mr. Fridgen, Decide's CEO. The result is that prices have become much more fluid than in years past, when items were discounted most heavily on Black Friday.
Vendors and retailers are under pressure from still-frugal consumers and heavy online competition to offer discounts more frequently throughout the holiday season.
John McCarvel, the CEO of Crocs Inc., says the shoe maker has a big Black Friday planned at its 200 U.S. stores, but he's also planning promotions in early November and after the Black Friday weekend to keep customers shopping. Last year, Crocs sent its customers a mailing with a coupon in the first week of December that drove traffic, he says.
"I think you have to do more in this marketplace," Mr. McCarvel adds, referring to the need to be aggressive with discounts. "The consumer will shop where they can get a deal, whether it's finding you online or at Amazon and other locations."
Write to Dana Mattioli at dana.mattioli@wsj.com
