The difference between "sales" and "profits"

http://www.signonsandiego.com/uniontrib/20081205/news_1b5retail.html

Oh how I love the media. And oh how I love it when they twist consumer spending numbers.

You see, no one seems to understand the difference between "sales" and "profits." A business can have billions in sales and still be failing (read: US automakers). Sales is the measure of how much a business is actually selling, and profits measure how much a business is capitalizing on those sales.

Therefore, when the media says that "sales" were higher than expected on Black Friday, what does that actually mean? Nothing, of course. Black Friday consists of deep discounts of anywhere from 30% to 80% off; doorbusters are often priced at cost or even at a loss in order to get overzealous customers in the door. Sure, they are selling a lot of it, but that doesn't mean it translates into profits, making it practically meaningless to the economy. Note to the budding entrepreneur: if you give stuff away at cost, people will buy it.

Shoppers are certainly tightening their belts, but the "spend spend spend" mentality of this country will not disappear overnight. If you flash a "75% off" sign in front of a consumers face, it's likely they will reconsider their cash-hoarding ways and crack open their pocketbook.

A fundamental change in the way we consume will take place after we slip deeper into this recession (depression). People are just now starting to feel the effects of the current recession with job losses and the scarcity of credit. This is step one of many that will forever change consumer spending habits. Unfortunately, I think the coming consumer credit bubble will accelerate the process.