The broken economics of Black Friday

Fashion is addicted to slashing prices because brands make too many clothes

Black Friday is the biggest day in the retail calendar, and it looks like it’s going to be an extra big one this year. That’s partly because inflation is putting a dent in shoppers’ bank accounts — so stores need big markdowns more than ever — but also because there’s still so much product out there after the post-pandemic spending spree. And what are you going to do when shoppers are broke and you’ve got too much stuff in the warehouse? Go on sale.

Even before the pandemic turbocharged shopping habits, Black Friday had grown into a giant, all-encompassing beast. Rather than a one-day flash sale, it’s now an entire week of markdowns. And this year it’s come straight after a “mid-season” sale, which might just be a subtle way of saying that pretty much the whole season is a sale. And if retailers don’t hit their targets this week, there’s always Cyber Monday, and if that doesn’t work out, then we’re only six weeks away from January.

Slashing prices is a completely ordinary part of the e-commerce game now, and it’s pretty much a given that late November to early January = the time to buy stuff for cheaper. There’s different ways to do it, and brands have also started restricting what can and can’t be marked down (not that everyone listens, though). Ssense’s sale is legendary in its size and scope, and this year the platform is taking it semi-private — you need to sign up to the newsletter to access it, probably so they can email you about more sales next year. LN-CC, meanwhile, invites you to join a Whatsapp chat to get early sales access. Net-a-porter already has over 10,000 items at up to 80% off. 

But at the end of the day, sales season only exists because brands make too many clothes to begin with. 

Here’s how it goes: a brand designs a collection, filled with loads of really cool ideas that they want to make. Each of those ideas is essentially a bet. You have to gamble on the fact that people like your idea enough to buy it — first at full price, but if it’s not selling too well, you can always mark it down later in the season to make it more tempting.

Of course, brands make educated bets — they know that the cool but easy to wear jeans and shirts are going to sell better than the wacky knitwear or the leather jacket made of Japanese horsehide. But brands are also scared of not making enough stuff — because what happens if your cool shoes are a smash hit and you didn’t make enough of them? Sales season helps to make the gamble less dangerous, because when sale season comes around, they’ll have a chance to sell it again at a discount. The whole thing basically encourages brands to produce more than they know they can sell.

As a rule of thumb, the more hyped a brand is, the less likely it is to go on sale, and vice versa. You’ll rarely see much from a Stussy or a Prada on sale, because the demand is so high that they sell most of their stuff at full price. Traditionally, brands in the quote-unquote sustainable part of the industry would boycott Black Friday, for pretty obvious reasons. But at the end of the day, everyone’s got to pay the bills, so don’t be surprised if you see a brand who closed their shop last year go to 30% off this time around. Fashion isn’t an easy business!  

The Black Friday sales mania is, at its heart, a sign that the economics of the fashion industry are all off, and the scale of the problem will make your head spin. In a New York Times profile of Ssense founder Rami Atallah, the luxury e-commerce giant said it sells over 70,000 different products (!) and uploads between three and four thousand products a week (!!). Ssense’s assortment is so gigantic that it has 26 photo studios just to shoot everything it sells (!!!).

Black Friday might be a good opportunity if you’re looking for a hand blender (guilty) or some replacement running shoes (also guilty) but honestly, it’s a pretty terrible time to shop for clothes. When you’re bombarded with Instagram ads, flash sales and newsletters telling you that now is the time to spend money, it’s easy to lose yourself. The urgency of this thing being at this price for this week makes the whole thing feel so intense that it’s easy to sleepwalk into a regret purchase. The irony is that buying something you don’t need just because it’s on sale is a pretty terrible way to spend your money. If you know exactly what you want, then by all means pull the trigger when it’s marked down, but actually browsing for new things to wear at this time of year rarely leads anywhere good. 

Fashion’s addiction to markdowns isn’t great for the overall health of the industry, because shoppers get used to the idea of everything being reduced, which makes selling something at full price that much harder. And of course, it encourages some pretty unhealthy shopping habits — think of all the regret purchases that are going to be made this week. But we can’t really blame shoppers for the mess, because the economics of the fashion industry practically guarantees markdowns and overproduction.

There are signs that the industry is starting to quit some of its bad habits. The success of brands like Stussy and Our Legacy, who are both killing it right now, is partly down to the fact that they keep pretty tight control over how much they produce. If this season’s best pieces sell out super fast then it’s fine, there’s more coming next season. It really comes down to having a long-term strategy, not dumbing down to stupid trends, and only making what you really want to make. Fashion is a paradox of a business because it moves so fast, but sometimes it’s better to take it slow.

If I were to look into my crystal ball and imagine a solution for all this, it would be in more agile manufacturing. Instead of making mountains of clothes six months before anyone actually wants them, a more responsive supply chain would allow brands to more accurately respond to what shoppers really need. Adidas’s “Speedfactory” project was an experiment with a factory in Germany that could design, produce and deliver shoes in just 45 days. It didn’t work out, but this was years ago. And Vietnamese denim manufacturer Saitex also tested out a highly automated California facility to produce small batches of jeans as and when they’re needed. If things didn’t work out then, that doesn’t mean they never will. You could even imagine a future where shoppers go into a store to try something on, then preorder it specifically to their measurements and pick it up weeks or months later. This would be a huge help for anyone who doesn’t always fit into an off-the-rack size (guilty), and offer up a lot of opportunities to create really special, one-off pieces. But that seems like a long way off right now — fashion is a really old-school business at the end of the day, and you know what they say, old habits die hard.

At the height of the pandemic, a group of designers led by Dries Van Noten released an open letter calling for the industry to restrict markdowns to just January and July. The open letter had hundreds of signatories, mainly from high-end brands and retailers, but it doesn’t seem to have been listened to — just a few years later and it’s looking like the sales are going to be even bigger and deeper, as the post-covid shopping craze crashes down to earth. Business of Fashion speculates that this year might “definitively close the book on the post-pandemic ‘revenge shopping’ boom” — aka we’re back to business as usual.