The Economics of Fifty Linden Fridays -- Or, Why Dozens of SL Merchants Willingly Sell Items for the L$ Equivalent of Twenty Cents

The legendary Fifty Linden Fridays shopping extravaganza, in which top SL brands offer select items for a mere L$50 (i.e. about 20 cents), has been running since 2009.  But it only just occurred to me recently: How the hell does this even make any economic sense?

Or as regular reader Patchouli Woolhara recently commented:

After the initial costs of tier, tooling, marketing, blogotex access, customer support, and hours worked, the marginal cost of these products is close to zero on the merchant's side if the sale is done purely in-world. 

Probably a lot less than zero, actually -- surely most merchants must lose money from FLF?

Not exactly, according to FLF creator and manager OMGWTF Barbecue (whose avatar name I just goddamn adore).

"Partly, FLF brings people to their mainstores," she tells me via Discord. "People might be discovering their store for the first time, and checking out their other products, which is super valuable! On top of that, it's a little special treat for people who are already your customers, something to look forward to. The creator might reduce the price to L$50, but it's likely they'll be able to sell more based on the co-op nature of the event."

She's talking about the power of cross-promotion across brands:

"FLF has always worked by sort of combining and harnessing the power of everyone's customer bases. Each participating store sends the notecard of landmarks out to their customer base, so everyone is kind of sharing and spreading the info around." 

While Ms. Barbecue declines to discuss specific sales figures, "[A]necdotally, creators continue to tell me that the event is successful for them. I even sometimes hear that FLF is their favorite event, because it helps bring people to their mainstores!"

And that's how she's managed to run Fifty Linden Friday for over 11 years, with 60 participating brands, and 46,000 SLers who belong to her in-world group, avidly waiting for the next FLF offer. (Click here to join here yourself),

Comments

[Taylor]

I remember an interview with the developer of the very successful indie game The Binding of Isaac where he was asked why he would choose to participate in Steam sales that discounted the game by 75% -- a pretty similar ratio to a lot of FLF items (200->50) I've personally bought.

He said the discount multiplied his sales by *60* (not 60%, but x 60). I suspect it's a similar situation for a lot of FLF sellers, especially since many tend to discount slightly older items or uncommon colors that may barely be selling at all on their own.

[camilia fid3lis nee Patchouli Woollahra]

The "Marginal Cost" I am referring to in the original comment is the extra cost needed to pump out one more unit of the same product. I already referenced the costs that would be incurred regardless of how much of the product is sold - the R&D, the modelling and scripting, tier for inworld shop space, marketing, ensuring bloggers get their paws on free product (Blogotex costs money to maintain) - but once all that is past, when you buy a dress in SL inworld, the merchant incurs basically nothing in the way of extra costs for most products unless they require some form of service external to the LL-provided grid's servers (e.g. Smartbots bot script execution, networked fishing game systems) . The only way marginal costs for a product could fall to less than zero is if LL paid creators a subsidy on every unit sold, a situation that is really impossible.

[dan]

Yes, the effect on your sales day is good! You get a good extra, however - noone talks what happens day after, two days after, week after. From my personal experience - your sales are not becoming bigger thanks to all the people who rushed in for 50L$ product. Very few % of those people actually are willing to spend anything above 50L$. Some do, but that's a minority. Thing is that these kind of events train people to pay less and less money per product. It becomes a norm. To a degree that seeing anything above 500L$ mark ignites a major hesitation in them, no matter what quality the product is. As I pointed earlier, there's only that much space left before noone will want to pay anything at all and they would be trained to get everything for free! You're quiet near sighted in thinking that this kind of event happening regularly will not cause any problems in a long run. Look around, compare prices you were able to sell your products 3, 5, 8 years ago.

[Blaise Glendevon]

Dan - the Second Life fashion community has shown itself more than willing to pay top price for brand new items. "My favorite color is fatpack," is a saying I heard as a newbie in 2010 and have continued to repeat even now. The issue you're whatabouting isn't a problem. The people who care to have new releases at full price crowd the shopping events first day of release and the people who are looking for discount get their needs met as well.

You really should consider the market before you mansplain things.