I usually more or less finish my Christmas shopping before Black Friday, so I usually do not worry about optimal shopping strategies. I enjoyed reading about Aurelie Thiele’s latest paper on robust timing of markdowns.  Her blog post summarizes her new paper (she provides a link to the paper), where Aurelie and her collaborators propose a method for dynamically timing markdowns over a finite horizon using robust optimization models.

This got me thinking about how to reverse-engineer the process to get the best deals.  If you’re not willing to do Black Friday shopping (the getting up at 3am and waiting in long lines do not make up for the extra savings), then shopping for a few key items is like a stopping problem (e.g., the Secretary Problem), where a series of deals are offered (some at the same time, such as in the Sunday ads) and the consumer eventually decides to purchase exactly one item with a deadline of December 24.  When should I purchase the item?  I suppose it depends on how retailers adjust the prices from one time period to the next.

These are a few rules of thumb that I’ve learned (beware: no modeling or algorithms used here).  With a bad economy, I see no drawback to a wait and see approach, since sales continually improve and store coupons become available as shoppers stay home.  I have found that in the last three years or so, the pre-Christmas sales (not just Black Friday) are often better than the post-Christmas clearance sales.  So I stock up and do some personal shopping before the holidays.  However, the clearance sales become lucrative in February and insanely good in March (for clothes, at least).

How do you do your Christmas shopping?

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