It is hard to believe that a mere week ago, I was basking in the sun, enjoying my last few moments of summer vacation-only to be thrust into work mode a day later for the Fall 2013 semester.  The transition into this particular semester is unusually rough because after barely three days of classes, Queens College was closed  for Labor Day. This holiday weekend served a double purpose. First, it enabled those who were already exhausted to catch up on sleep. The purpose that resonated more with me, however, was to exploit incredible deals and amazing savings in the shops. While I unfortunately was not able to hit the racks this year, I find it interesting to analyze the economics and psychology behind the behavior of firms and households during the Labor Day sales.

Before I begin, it is important to understand why we had off (Granted this is a financial blog and not a historical one. In the business world, though, the more you know, the better off you are). Labor Day officially is, according to Wikipedia, “ a celebration of the American labor movement and is dedicated to the social and economic achievements of workers”. Since it is a public holiday, shopkeepers keep their stores open so as to entice those who have off from work to shop. I find it rather ironic that a day intended to pay homage to workers ends up forcing many of them to work (often even for extra hours!) on a day when they too should technically have off. But I digress…

For both firms and households, Labor Day is a major boon. By firms, I mean companies and stores that sell goods and services; by households, I mean people like you and me who buy the goods and services from the firms. Knowing that it is the last official vacation of summer, firms recognize Labor Day as the last possible opportunity to grab the attention of shoppers who are off from school and work. More importantly, it is their final chance to clear the shelves of their summer inventory-items in stock that are to be sold. Getting rid of these goods is vital for stores because they want to bring out next season’s items and make money off of the remaining inventory. Often, stores do not even require coupons to benefit from these sales because they are that desperate to bring out the fall season items.

This desperation puts consumers in an advantageous position. The items that are put on the end of the season clearance rack must not automatically be disregarded. Often people assume that the damaged goods are the ones that are left over. This is most certainly not the case; there are a plethora of reasons as to why an item is still there. For example, people might have liked the item beforehand, but did not buy it because it was originally too expensive. Now, on clearance, it might not just be cheap, but a steal! Or, more simply, people might have genuinely overlooked the product and only you are now fortunate enough to find it. Of course, it is necessary to first consider how much use you will get out of the item. For example, if you buy something at a rock bottom price but end up never using it (gym equipment coat rack?), you have just wasted your money. However, it is  also possible that you do not need any of the things now, but come Summer 2014, you will be well equipped for the new season.

Especially in clothing stores, I noticed a pattern as to the type of customers that firms tried to appeal to. Since teens and young adults are on the brink of returning to school and college, respectively, this is their last opportunity to splurge. Additionally, parents need to buy school shoes and clothing for their children. Such purchases are guaranteed considering the fact that kids have outgrown their old duds and need new gear. Therefore, it is not uncommon to see a mall inundated with deals especially directed at younger consumers on Labor Day weekend.

With the possibilities for incredible sales, it is easy to get carried away when shopping. But buyers beware: shops are not always charging the lowest prices when they advertise sales. They might indeed deduct a percentage off of the cost-but at what cost to you? Often, prices are “jacked up”-or increased higher than normal- so that once the discount is applied, the store charges the same amount as, if not more than, they did originally. It is a psychological tactic that frequently tricks the naïve shopper. For example, you might pass off buying a bag for $100, but if the tag says it was originally $200 but now, at 50% off, it is $100, you might think it is an amazing deal. A wise shopper is not one who can simply find bargain prices, but one who is shrewd and thinks before he/she acts.

Labor Day generates the second largest amount of sales in a year, only trailing Black Friday (which I will obviously devote a blog post to when the time comes). The difference between the two is that while Black Friday requires organized planning well in advance, Labor Day does not require that type of effort-it is significantly more family oriented and less violent. Labor Day may seem like only an insignificant, casual day off, but upon closer inspection, this day and its sales bear much financial and economic significance.