The Free Market In Action – The Giant Retailers Begin To Buckle
If you purchased a newspaper in the past week or so, you might have noticed a bunch of circulars advertising post-Thanksgiving sales. The stores publicize these sale prices in an attempt to attract customers for what is known as “Black Friday,” the day after Thanksgiving which, by custom, is one of the largest shopping days of the year. These circulars are important; even if the prices are not truly the lowest in the market, the perception of low prices will attract customers. And, in the days when comparing prices across many differently organized and formatted circulars was arduous, retailers could take comfort in the fact that the circular would bring in customers.
Unfortunately for retailers, the rise of the Internet made this practice dangerous: people started setting up websites that reorganized the sales information and allowed people to compare offers easily across stores an multiple product lines. This put the store owners in a quandary; they want to publicize prices to attract customers, but if the bargain hunting becomes easier, they will have to really slash prices to attract customers and their bottom lines will get tighter.
This gave rise to a new Thanksgiving tradition, the lawsuit against price comparison websites:
For the last several years, Wal-Mart Stores and other large chains have threatened legal action to intimidate Web sites that get hold of advertising circulars early and publish prices online ahead of company-set release dates. The retailers’ threats rest upon some dubious legal arguments, however, which may be the reason they haven’t shown a keen interest in actually going to court over the issue.
Wal-Mart has been among the most aggressive retailers in trying to cow consumer Web sites. Last month, it sent a cease-and-desist letter to BFAds.net, a site devoted to publishing Black Friday ads. Wal-Mart sent the letter even before BFAds had published Wal-Mart’s sale prices, so the cease-and-desist letter would be more properly called a “don’t even think about it” letter.
This year, however, retailers are unusually desperate to get bodies into their stores since the consensus is that this year will be an “off” year for retail sales. This desperation has prompted many chains to not attack the bargain hunting websites but to cooperate with them:
This holiday season, chains large and small quietly handed over their circulars to Web sites like Bfads.net and Gottadeal.com to ensure that millions of deal-hungry shoppers see their discounts well before the day known as Black Friday, traditionally the biggest shopping day of the year.
Over the past few weeks, Home Depot, Pacific Sunwear, CompUSA and OshKosh B’Gosh each supplied the sites with an advance copy of its ads, according to the chains and the sites’ owners.
In fact, some retailers even went so far as to check to ensure that their circulars had been published on Bfads.net, contacting the website’s founder when they didn’t see their sales listed on the website.
There are some firms that truly have the lowest price on some set of one or more goods. To these firms, websites life Bfads.net are not the enemy, but rather a powerful and free advertising tool. These firms are embracing these websites, and attracting the bargain hunters into their stores. And, since these bargain hunters tend to be mavens whose recommendations can drive tens, hundreds, or even thousands of people to a store these cooperating firms are ensuring banner years for themselves.
Even the officers of big, bad Wal-Mart recognize this. One even wrote a letter to the owner of Bfads.net, thanking him for bringing customers to Wal-Mart:
“I checked out your site today and yesterday and we pulled some traffic reports — great job … Almost over 43,000 clicks just yesterday alone. … Thanks for giving us a nice write-up on your front page. Keep up the great work!”
This is the essence of the free market. People who depend on the voluntary business of customers must excel at satisfying their customers’ needs to thrive and prosper. While most merchants would love to pay little and charge dearly for their wares, only the ones who charge the least dearly will be able attract the customers they need.
Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages. – Adam Smith, The Wealth of Nations
So, as you sit down for what is hopefully a nice feast, please remember to give thanks to the wonderful human invention, the one that has allowed our species to spread across the Earth and to enjoy lives that are anything but short and brutal, the concept known as the Free Market.