“Strategic direction is more important today. It's about providing a framework for managers to navigate through the fog of complex chokes. No company can avoid this."

– C.K. Prahalad –

PoS Nov 2014 | Prisoners’ Dilemma on Thanksgiving Day in USA

An interesting war is heating up among national retail chains in America.

A number of them have announced they will open on the evening of Thanksgiving Day celebrated on the fourth Thursday of November. Macy’s will open at 6 PM on Thanksgiving Day for Black Friday sales. J.C. Penney did one better; they will open at 5 PM. Last year they had remained closed. Best Buy, Walmart, Toys R Us and others are expected to open earlier still.

Black Friday, the day after Thanksgiving, ushers in the November-December holiday shopping season. The long weekend helps. In 2012, total spending over the weekend rose 12.8% to $59.1 billion. An estimated 139.4 million adults visited stores and websites. Opening early can, therefore, be a very big deal!

Who comes first?

If one chain opens early and stays open through the night, and others don’t, they will do great business. Others can hardly afford to stay closed.

But if most of them open early, no one will do better than others. Instead they will face the wrath, deep disgruntlement at the very least, of employees forced to be at work.

A question of tradition

Traditionally, stores remained closed on Thanksgiving Day to allow employees to celebrate the most important meal American families eat together.

The trend to open early has been gathering momentum in the last few years. But this year it appears to have taken on shrill overtones. Among chains that will stay closed are Costco, Sam’s Club, Home Depot, and Nordstrom.

Some of them are suggesting competitors are employee unfriendly. Others are highlighting their own family values and hinting that stores that open on Thanksgiving are ruining something sacred.

They have gone ahead and created the Boycott Black Thursday page to persuade consumers to avoid stores that will open and instead buy from those that will not. It remains to be seen if the strategy will pay off but that a very large section of Americans share their feeling is not in doubt.

The Game Theory Perspective

In the parlance of Game Theory, three games are being played out.

The first is among retailers who will open early. They are locked in Prisoners’ Dilemma. None of them will gain share from each other. Worse, they will earn the displeasure of employees.

The second game is between stores that will open and those that will stay shut. The former will clearly gain significant revenue at the expense of others. That is why others are fighting back.

These chains have initiated the third game, with customers who will not shop on Thanksgiving Day. These Customers have two choices: they can preferentially shop in stores that will stay closed, or buy from others as well during the holiday season.

Stay-closed stores are appealing to consumers to prefer them, hoping Americans will value the payoff of solidarity with an important American tradition besides competitive promotional pricing.

Who will win and by how much is a moot question. The important lesson for the strategist is how to shape the game they want to play.

Relevance in the Indian scenario

What, for instance, should bar-restaurants in Bangalore do if a few start closing later at night, say at 3 AM, if it was permitted? How should workers’ unions in an industrial cluster respond if the largest union has just agreed to work longer hours in some firms? Would customers prefer to buy from Raymond if the Company offered refit or alteration services?

What strategies would competitors adopt? These and many other questions can seek answers from Game Theory.

Related reading: The retail war on Time