The Only Thing You’ll Need to Read About Saving Money on Black Friday
You may think you’re getting a great deal on that holiday gadget, therefore justifying standing in line at some ungodly hour to obtain said gadget.
But you might want to reevaluate. Time really is money, especially when it comes to events like Black Friday, says marketing professor Stephen Hoch from the Wharton School at the University of Pennsylvania.*
“There’s only one day more stupid than Black Friday for shopping, and that’s Thanksgiving,” Hoch says. “I think retailers have gotten themselves into this game where each one has to shoot first across the bow, and there is absolutely no reason to go shopping on that day,” he said, adding that most of the deals that consumers will see on Black Friday will also be available at other times throughout the year.
Hoch over the past decade has studied the value of time in monetary terms, and has come up with some theories on the ways people rationalize the value of their time. In a paper he co-authored in 2003, “Spending Time vs. Spending Money,” Hoch wrote, “People can acquire products either by paying hard cash (money) or expending effort (time), but typically there is a trade-off between the two currencies.”
I called Hoch this week to ask him for his thoughts on Black Friday shopping. Below are excerpts from the conversation:
AllThingsD: Is there a standard formula that consumers can use right now to calculate the monetary value of their personal time?
Stephen Hoch: Well, it can be very elastic, and it depends, because people engage in justification. Also, their time doesn’t have the same value all the time — especially for people who don’t just work an eight-to-five day, which most people don’t do anymore. They work from home, they respond to emails on their cellphones, and all that. So, now, in order to calculate this, you just really need to take a longer-term perspective.
I will say the whole notion of “opportunity cost” is maybe one of the most helpful hints from economics that you could possibly use. If you just recognize that you can substitute different activities across time, then you start to look at something like Black Friday differently. Just because you’re not being paid at that second, doesn’t mean that time doesn’t have value to you.
I always say, poor Bill Gates. If you think about the value of his time like this, he wouldn’t be able to go to the bathroom.
AllThingsD: Let’s use the $500 Xbox One or the $400 PS4 as examples. Assuming that a person waits in line for maybe six hours for a $100 discount — is that worth it from a time-money perspective?
Hoch: It depends on how much you want to value that time. I did a study called Cherry Picking, in which we looked at lots of grocery-shopping purchase data for a panel of people. We looked at what happens when people go to two grocery stores in the same day, versus one (store), and how much money they’re actually saving when they’re racing around for the bargain. We found that people who went to two stores in a day would save about $18 more than if they only went to one grocery store. But that extra trip to the grocery store ended up costing about 45 minutes. So is 45 minutes of your time worth $18? For a median-income person, it is. So you need to think about your personal “wage rate.”
If you can think about what that is, then many people would say, “No, waiting in line for six hours to save $100 probably isn’t worth it.” It might be better to look online.
AllThingsD: What about products that are in great demand, but in short supply? Does that alter the time-money formula for Black Friday?
Hoch: That’s all fake scarcity. There is no scarcity, at least, in the long run. In the short run, people are standing outside of Apple stores to buy the new phone, right? It’s about bragging rights, or it’s the thrill of the hunt. It also a social event. But there’s a resale market, too. Even with things like tickets — you go to StubHub and you pay more, but a lot of people with sense would rather do that than stand in line.
* Those of you who are still determined to buy gadgets on the cheap this weekend will likely disregard this post, so here are some stats that will make you feel better: 60 percent of holiday shoppers plan to purchase at least one consumer electronic device on BlackFriday, and 71 percent have already started shopping, according to new data from Parks Associates.
And, as my colleague Jason Del Rey reported, online sales are expected to grow by 15 percent this holiday season (just like the two years prior), to $78.7 billion, so more people are taking the “lean back” approach and shopping from the couch. Which, of course, still takes time, but involves less pushing and shoving!
(Feature art courtesy of Lance McCord/Flick Creative Commons)