An Economic Problem for Dummies! Todays problem: Making Santa a viable business!

It’s snow joke!

Santa consults his naughty list, possibly with the aims of keeping his costs down.

Economics is, by definition, the allocation of scarce resources to fulfil infinite wants and nothing is more applicable than the allocation of scarce resources to make presents so as to fulfil the infinite wants of children’s Christmas presents. Christmas is an economic problem on a grand scale with it being the largest time of trade. But despite this one key aspect of Christmas has yet to be made into a business. I am talking, of course, about Jolie old Saint Nick. But how could Santa be made into a profitable business, surely all sorts of complications arise when creating the largest, international firm in the world.

Santa delivers to all children world wide, that’s 1.8 billion people and the average cost of a child’s total presents at Christmas, in the West, is £129, so what other costs are involved for father Christmas, aside from the 2.3 trillion pounds of Christmas presents, and how can he make these costs up? Well Santa has to successfully manage nine reindeers and maintain them throughout the year with food and enclosure, this would cost Santa about £12489 in total. Then there’s Santa’s workforce, the elves, whom it is estimated Father Christmas who, assuming each elf could make 10 toys a day, he’d need 500 hundred of. 500 elves at minimum wage would be about £17300. Those are just a few costs that would need to be considered, not including elf housing, the factory for making the toys, the tools, the sleigh or the wrapping paper.

From this, however, we can conclude Santa would have quite a few trillion pounds revenue to make in 24 hours to stand any chance of making a profit. Santa could make money by offering a charge for each present although it would have to be an amount that most people would be prepared to pay to prevent them from buying the presents themselves. This would be difficult as he would have to carefully source all of his materials to ensure he could make the presents for less than the high street value and it couldn’t be a unit price because different families would be prepared to pay different amounts of money.

He could offer a subscription service, similar to mobile phone carriers, whereby people would pay a subscription to have up to 10 presents without exceeding the limit on the assumption that most children’s wish lists would be less costly than the service. This would however leave the possibility for children to ask for extremely extravagant gifts, which would be hard for Father Christmas to deliver and could be more costly than the service. Santa would therefore have to implement restrictions on the service, with criteria like:

1.     It can’t weight over 100Kg

2.     It must be physically possible

3.     It has to be legal

4.     It cannot be a limited resource

And so on…

Another possibility would be to take the Google approach and make manufacturers pay to have their gifts take priority. For example, if a 10,000 children asked for a games console, Sony could pay Santa 1million pounds to give them a PS3 rather than an Xbox or a Wii. This would give the manufacturer advertisement and would give them dominance over the market, so the children’s friends would then buy that console so as to fit in. Santa could then play the firms off against each other in an auction style to raise the prices higher.

Santa is always a prominent advertiser of Coke

            Advertisement could be another route, with Santa giving up space on his sleigh to companies’ logos, he could use branded wrapping paper and cards from those companies and get them exposure. The down side with this is that people tend not to see Saint Nicholas and therefore advertisement on his sleigh wouldn’t be the best. He and his elves could also appear in films, TV and adverts for large fees, some movie stars are paid millions for each film and there are over 50 Christmas themed films out on the market so if Santa made appearances in them, plus franchises like the Santa Claus movies could help get Santa a lot more money. Plus the use of his likeness, in things like Coca Cola’s Christmas advertising campaigns.

            The truth is Santa could combine these, making people pay for their gifts, give priorities and advertise, so as to maximise revenue. This would make sense as none of these three compete with each other so could be used in harmony. This only scratches the surface of the potential for Santa, I haven’t even mentioned keeping costs down by putting most kids on the naughty list and giving them coal or floating Santa on the stock market.

Merry Christmas!