Does Amazon Know It's Cyber Monday?
I began using Amazon a few years ago. It was getting harder and harder to find the DVDs I wanted on store shelves. A major release, no problem. Independent or foreign films, not as much. And don't expect to find anything that had been released six months earlier unless it was still a best seller. Tower Records and Virgin both had a very decent movie sections. So did Circuit City. All three would go bankrupt early during the financial crisis. What was left behind was Target and K-Mart with their minuscule two shelve DVD sections. Amazon had everything. If it was still in print, you could buy it from Amazon, and even a few movies that had already gone out of print. I had taken a break from buying everything for a couple of years, with the exception of food and other necessities. In 2010 my financial situation stabilized enough that I was able to buy DVDs again, and decided to play catch up for the releases I had missed. My budget was $25 a week.
There were some exceptions. My birthday I would splurge and award myself a $200 budget, go crazy and by a box set or two. I would also go crazy with my tax return. And then there was Cyber Monday. Last year I bought into the propaganda and decided to spend $100 on what I assumed would be bargains. Take advantage of those sweet Cyber Monday deals, I thought.
Lets step back a few weeks. I had a friend who did his Christmas shopping early, and had a relative that wanted the Batman Motion Picture Anthology, a box set of the Tim Burton and Joel Schumacher films that nearly tanked the franchise. He had gone to a few stores, Target and such, and had all but given up. The Anthology box set was a few years old, and something most stores simply no longer carried in stock. But Amazon had them. I had an Amazon account, my friend did not, so he asked me to order it for him. I told him that if he waited a month he could probably get a better deal ordering it on Cyber Monday. But he was insistent on ordering it right away.
Okay, back to Cyber Monday. I had just finished ordering $102 worth of DVDs, some as gifts, others for myself. The prices seemed reasonable. Amazon had the original retail price on each crossed out and replaced with the sales price. I was saving a few dollars on each. I put the items in my shopping cart, took them all to checkout, and completed the order. It was then out of curiosity I looked up the Batman Anthology to see how much money my friend would have saved had he been patient. What I found was unbelievable. A few weeks earlier I had bought from Amazon The Batman Motion Picture Anthology for only $18.41. The price for the same exact set on Cyber Monday was $47.99. That was a 250% mark up, on a day when the price was suppose to come down. Did I save any money by buying on Cyber Monday, or did I end up paying twice as much?
Maybe the Batman set was a fluke. So this year I tracked the prices of the DVDs I wanted to buy, including two expensive box sets. On Friday Amazon was selling Three Stooges Ultimate Collection for $39.99. The price shot up to $78.89 on Cyber Monday. Eventually by the end of the day the price came down to $61.89, but for most of Cyber Monday it was selling at a nearly 200% mark up. The Complete Larry Sanders Show box was at $94.98 on Friday, and $129.99 on Cyber Monday. I was also tracking several other DVDs. Most went up in price. A few went down, but by only a couple of dollars. I ended up spending no money this Cyber Monday.
Cyber Monday's origins lie with another pseudo Holiday, Black Friday. Retailers had always looked at Thanksgiving as the kick off of the holiday shopping season. M*A*C*Y's Thanksgiving Parade has always been an elaborate publicity stunt to get shoppers into their flagship store. The parade has always ended with the arrival of that years store Santa Claus who pretended to have the authority to declare the beginning of the Christmas season, then beckon shoppers into the store. ( This part of the parade is no longer televised. NBC finally figured out it was a commercial and declined to include it in their coverage unless M*A*C*Y's agreed to pay for it. ) Despite the crowds generated by the event, Thanksgiving proved to be a poor day for their annual sale as most people preferred staying home. The Friday following Thanksgiving was another story. Many businesses were closed allowing for employees to spend the entire weekend with their families. By default the day after Thanksgiving became a major sales day for many retail stores. These sales were no different than the ones for Washington's Birthday or Columbus Day, just an excuse to lure customers in by slashing the prices on the overstock they are trying to get rid of and marking down the other merchandise by a manageable 10%. It would not be until the 2000's that merchant's re-dubbed the day Black Friday and would begin to whip shoppers up into a frenzy by offering mind blowing door-buster sales.
Black Friday is a bit of a fraud. Yes, there are door-buster sales, those electronics and other expensive items being sold for a fraction of their retail price. But each store only has a limited number of these items on sale, which is why you see a stampede of customers racing through the doors the second the store opens. Otherwise the regular store merchandise on sale is no more of a bargain than it was with the old M*A*C*Y's after Thanksgiving sales. The real bargains do not show up until mid December. That is the time of month, the pre Christmas crunch, when retailers slash their prices to lure you away from their competition. But because of all the hype given to Black Friday, most Americans assume it is the prime day for bargains. The malls are filled with jubilant shoppers spending wildly on sales of no more than 20%.
Cyber Monday was invented almost immediately after Black Friday. Online retailers reasoned that if the malls could have their sales holiday, then so could the online shopper. The Monday after Thanksgiving had for some time been a strong day for online sales. All it needed was the same attention that was being given to Black Friday. And here lies the problem. You don't get thousands of shoppers lined up to use a website. There is not a stampede to show on the news. On the upside, no one gets injured or killed, and no riots break out over the last few flat screen televisions. But the excitement is lacking. Online retailers sought to attract customers to Cyber Monday by offering widespread bargains than even the box stores could not offer. And for a while there I was believing them.
My faith may have been shattered in Cyber Monday, but not in Internet shopping. Even marked up the DVD sets were well below what you would pay in the stores. Over all, I have found many great discounts online. DVDs that originally sold for $19 going as low as $1 still factory sealed. The only problem would be the cost of shipping. Often you pay more for the shipping than the disc itself. And then there has been the few times a shipment has gone missing, presumably delivered to a neighbor by mistake, a neighbor who decided to keep the package instead of reporting it. Each time Amazon has been gracious about it, accepting that the package was indeed lost even though the tracking information stated the package was delivered to my home. Replacements were sent, free of cost, no questions asked. They even told me not to worry if the lost shipment should suddenly show up. Don't bother shipping it back, just keep both. Over the years they have replaced more than $200 worth of lost stuff. I imagine there are a lot of unscrupulous customers out there who lied to Amazon of lost packages just to get a second shipment for free.
So why pull a move like jacking up the price during Cyber Monday? I discussed the situation online with some fellow Amazon consumers for their opinion. Some were quick to accuse Amazon of being greedy. Others questioned if what I was looking at Friday were lightning deals. Lightning deals are the internet's version of door-busters, only they pop up all year long. Without any warning a random item will suddenly be on sale for a fraction of it's price. After a couple of hours, or when a set number of the items are ordered, the lightning deal expires. I am pretty sure I was not looking at a lightning deal though. I found one message board thread started on November 9th that reported the Three Stooges box was available on Amazon for $39, nearly two weeks before I found it for the same price last Friday.
Then finally someone came up with an answer that explained why Amazon would seemingly violate Cyber Monday. Amazon is a huge company, so huge that there is no way for any humans to actually keep track of the prices on all their merchandise, which has been estimated at close to a million different products, at least. Instead Amazon has a computer that sets the prices. A special program that decides the price for each item on an hourly basis, taking into account the original retail price, how well the item is selling, if the item is still in print, what price the competitors are selling the same item for, and other factors. This is why the price of an item can fluctuate throughout the day. Here lies the problem. If any item slows down in sales the computer lowers the price. But any item that suddenly picks up in sales the computer automatically bumps the price up. It continues to sell well, the price continues to rise. Yep, it is the old supply and demand formula they taught you in high school. The problem is, that supply and demand is not suppose to take effect during a sale. Even if the executives at Amazon set prices low for Cyber Monday, the stupid computer regulating the prices will bump them back up the second the item starts selling. And since Black Friday weekend and Cyber Monday attracts hundreds of millions of customers to Amazon, the end result is that prices on many products rise on the one day they are not suppose to.
If this is true then online merchants like Amazon can not participate on Cyber Monday, and could be beaten at their own game by the very mall stores Cyber Monday was suppose to counter. Most of these stores now also sell merchandise online, and also participate on Cyber Monday. Their incentive for the Black Friday door-buster deals is to draw in crowds who in turn also purchase the regular price merchandise. This is the same incentive for their Cyber Monday deals. When buying online, most of them offer in-store pickup. They ship the item you ordered to a store near you, and you pick it up without having to pay for the shipping cost. In many cases Cyber Monday sales items are only available as in-store pickups. The end result, you are in their store, and probably buying other merchandise while there. Since merchants like Target have only a few thousand different items in stock, it is easy for humans to keep track of them and set the prices. When something goes on sale it remains on sale until the date the sale expires. Best Buy also offered the Three Stooges box set for $39.99, and throughout Cyber Monday the price stayed the same. Online shoppers looking for a bargain would have passed up Amazon and shopped Best Buy instead.
This does not bode well for Amazon. If they can not honor Cyber Monday by offering low prices then they could lose millions of loyal customers. But if it is true they need a computer to set prices, and the drawback is the computer does not understand a sale, then events like Cyber Monday are not possible for them. For a while Amazon was so massive that they were able to beat mall stores at their own game. Now their size may be the reason mall stores are beating Amazon at it's own game.