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Cyber Monday and the Effect of Sales

In the linked article, speculation is given as to how this year’s “Cyber Monday” will compare to those of previous years. This article gives several statistics to show exactly why the chances are good that this year’s event will draw even more money in – namely, the fact that “Cyber Monday has grown every year since it was first created in 2005.” (Pryor). In 2014, sales reached $2.65 billion (Pryor). Across the board, sales in nearly every category increased, resulting in an absolutely massive day for shopping online, on which many sellers offer their goods for extremely discounted prices.

One may wonder why, in fact, these retailers are willing to sell so many products on this date for such low prices. “Aren’t they actually losing money by doing this?” you may wonder. However, it makes perfect sense for these retailers to offer deep discounts on their products, and there is actually a rather simple explanation behind it. In class, we covered the subject of network effects upon the market, including tipping points. Namely, if a company wants a product to catch on, they need to get a certain percentage of the target population to start using it, in order to get the product past its market tipping point (and therefore rapidly expand its use through the market, in order to reach equilibrium). A very simple way for this to occur is for the price of the product to be lowered, resulting in more people finding it worth buying. This is a basic principle that all sorts of sales follow, including major events such as Cyber Monday. By deeply discounting products, the stores ensure that they will have greatly expanded business (evidenced by the sheer amount of transactions on that day mentioned in the article), and will therefore gain large traction in these markets. By offering such great deals, these stores are securing a foothold in networks that will undoubtedly reap benefits in the future.

Works Cited
Pryor, Kristin. (2015, November 28th). How will cyber Monday 2015 compare to past years? TechCO. Retrieved from; http://tech.co/will-cyber-monday-2015-stack-2015-11

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