When you think of Black Friday, what comes to mind? Scarfing down a leftover turkey cranberry sauce sandwich and heading to the mall? Or maybe getting cozy on the couch with your laptop and deep diving into Amazon's overwhelmingly huge list of deals. Either way, I'd be willing to bet you don't picture a small business owner plugging away, hand making their goods just so that they can sell them at half price.
At the risk of killing your Black Friday buzz, I'm going to share some hard facts with you about the relationship between small businesses and Black Friday. It's not all glitter and bows this time of year for small business owners- in fact, it can be quite the opposite. Now, I know I can't speak for every small business owner, but from my own experience as a maker, and the experiences I've had shared with me by many friends and acquaintances who also run small or handmade businesses, Black Friday is not fun for them. It's actually the opposite of fun, it's highly stressful and often very costly. No amount of meditating can combat this level of stress- trust me on this one.
You're probably thinking, 'I see small businesses making LOADS of sales on Black Friday... they must be rolling in it.' Well, no. Loads of sales, sure. Loads of money, not so much. When big businesses like Amazon make loads of Black Friday sales, they absolutely are rolling in dough. That's because Amazon takes 20% of all sales from their sellers, so even if you patronize the "handmade" section of Amazon, that seller isn't reaping the benefits as much as Amazon is. Even Etsy has upped it's fees so much in the past two years that their sellers are struggling to make a decent profit. Many sellers have profit margins so thin that Etsy actually makes a higher profit per sale than the seller does. *Cringe*
Ok, back to Black Friday. As a handmade fine jeweler, I will not be participating in the Black Friday hoopla, and I'll tell you why. It's a numbers game, and this year in particular, the numbers are bleak. The idea behind this blog post is to enlighten and inform, so I'm going to try to drop some knowledge on you so you can go forth into the world this holiday season and make good decisions.
Let's compare a Black Friday sale being run by a big name jeweler (think Pandora or Alex and Ani), versus a little guy like myself (Xanne Fran Studios... hollaaa). For consistency, we'll say both sales are 20% off everything. To understand how vastly different these two sales will turn out, we need to touch on how vastly different these two businesses operate.
The Big Guy outsources 100% of their production. They might have made their own goods at some point, but as their business grew, and demand grew, they found a cheaper, faster way to make their goods. Most likely, their products are now made exclusively in China or Taiwan, or whatever country gave them the lowest bid. (I'm sure I don't have to explain that overseas laborers get paid literal pennies, that's a whole other conversation.)
The Big Guy also buys their materials in bulk. And when I say bulk, I mean BUUULK. You're familiar with the 'buy more save more' incentives on many products.. well it's exactly the same for materials. When you're a multi-million dollar brand, you can buy an insane amount of materials at once, which means massive price cuts on those materials. We're talking raw precious metals, chains, gemstones, packaging and marketing supplies... etc. This also applies to postal rates, since carriers offer discount rates for high volume shippers.
Let's talk about the Little Guy. The Little Guy doesn't outsource because: the whole point of their business is to offer handmade artisan goods, they morally do not want to exploit overseas workers, or they don't have the demand to warrant mass production of their items. This means, they make everything themselves or in house, and pay themselves and/or their employees livable wages. (Because they have to eat and pay their electric bills.)
The Little Guy also buys in bulk when possible, but not to the degree the Big Guy does. The Little Guy can't afford to drop $200k on silver in order to get the deeply discounted rate, so they buy a little at a time, at or near market value. Same with all their other materials and business related goods. For example, the mailer boxes I ship my items in cost over a dollar each. If I bought 20,000 at a time instead of 200 at a time, they'd cost just a few cents each. Oh and the postal carriers giving me great deals on postage? Hahah.. no. Postage rates have gone up year after year, with no end in sight, and most small businesses pay full price or nearly full price. That's approximately $4-$8 per sale, just on postage. (Keep in mind my packages weigh almost nothing and they still cost this much.) Granted, us little guys don't have to offer free shipping, but many of us do because of the "free shipping" culture that's forced on us so aggressively. (Thanks, Amazon.)
Anwho, there are many factors in businesses large and small that dictate profit margins, but for simplicity's sake I'm going to do some generalizing. If the Big Guy's overhead and production costs are 10%, their profit margin is 90%. They run a 20% off sale and still make 70% profit. If the Little Guy's overhead and production costs are 70%, their profit margin is 30%. They run a 20% off sale and now they're only making 10% profit. Ouch.
A little part of you is going to cringe the next time you see your favorite small business advertising a 30% off sale, and for good reason. The pressure to run holiday sales is massive, and often small businesses are forced into it because of lack of options. With so many buyers holding out for sales, the last year has been especially devastating for business owners. Low sales and climbing production costs have forced many businesses to slash prices just to recoup the money they spent throughout the year on inventory that didn't sell. That means some are just hoping to break even. Are you having heart palpitations yet? 'Cause I am.
I apologize if I ruined anyone's fun, but this is a subject I've been passionate about for a long time and I hope that you found some value in my message. If you have the means, please patronize your small business friends this holiday season, they could use a win. (Seriously, pray for us.) And if you can't afford to spend the big bucks shopping exclusively small, which I totally get because it adds up quickly, your support and love is also highly appreciated. Reach out and tell a maker you love their work. Share their social media posts. Tell all your friends that have more money than you, (lol just kidding.. but not really.) You know, just be nice and do your part. We're all struggling these days, even the tiniest gesture of kindness can make a big difference.