With only a week to go until the launch of this year’s Black Friday event, shoppers are preparing to bag themselves some irresistible bargains. But what can shoppers expect this year and what will it mean for retailers themselves? With some leading retailers opting out altogether, what does it spell for the future of the event, and will it drive profit or damage long term margins?
What is Black Friday?
In case you have missed all the hype in the press and online, Black Friday is the start of a weekend-long discount shopping event which kicks off the day after Thanksgiving and marks the official start of the Christmas shopping season. This year it will fall on Friday 27th November. The discount sales finish on Cyber Monday, so called because it is traditionally about online exclusive deals so that people back at work can continue to shop. During this time, customers can expect large discounts on a whole range of items from brands covering electricals, entertainment, fashion and other numerous consumer goods and products.
The event has been a huge fixture on the US Retail calendar for many years, and its origins go back as far as the 1940’s under Franklin D Roosevelt’s administration. In 2014 US consumers spent a record-breaking $2.4 billion on Black Friday, up an extraordinary 24% on the previous year. (Source: Adobe)
Cyber Monday is traditionally the biggest online sales day of the year in the US, but consumers are increasingly recognising that retailers are maximising their use of digital channels and that they don’t need to wait until Cyber Monday to take advantage of the best deals.
40% of US consumers purchased something online during the event last year and this year online and mobile will continue to be very important for retailers. However many of the largest chains say that they still prefer shoppers to visit their stores, as well as use online channels, as this increases the number of impulse purchases made.
Black Friday was brought to the UK by Amazon about 5 years ago and the event has grown year-on-year ever since. According to Amazon, 84% of shoppers say they’ll do their black Friday shopping with them this year. However the sales now extend way beyond the Amazon website.
In 2014 Britons spent online at a rate of £9,375 every second and this year it is set to rise to £12,380 per second. (Source Centre for Retail Research)
In fact analysts are predicting that Black Friday will see the UK’s first ever £1bn shopping day, with a total of £3.5bn being clocked up by the close of business on Cyber Monday. (source NRF)
Whilst this event in the Retail calendar is now well known in the UK, across Europe there is less take up. In fact two thirds of the total European spend on Black Friday is expected to come from the UK, with Germany the next biggest country, who is expected to spend £280m on goods.
So why are some UK retailers opting out of Black Friday?
Black Friday has not brought success to all retail participants. Last year some of the big retailers planned well in advance for this and set their promotions on specific targeted items. However others who hadn’t planned to take part suddenly saw the scale of the event and panicked that they would lose footfall and market share at a key time and started to slash prices across their ranges.
“Those retailers ended up losing margin as they typically went for a percentage cut across numerous or even all lines, rather than having planned promotions that they could have organised with the help of their suppliers,” Said Patrick O’Brien from Verdict Research.
There is no doubt that the event generates a huge spike in sales, but at the same time it also condenses activity into a very short period of time putting a strain on retail resources from staffing, online bandwidth, stock availability and visibility through to order fulfilment and delivery of goods. Many retailers complain that the event has delayed spend during October and the first half of November as shoppers wait for discounts later on. It also impacts the Christmas sales with customers less willing to pay premium prices for goods during December, after some of the brands have participated in price drops.
Last year many retailers experienced problems when their websites crashed under the sheer volume of transactions and visits. Many also had terrible issues fulfilling and delivering orders which annoyed customers and led to additional operating costs.
This year a number of big names have opted out of the event in favour of selected discounts over a much longer period in the run up to Christmas. Many analysts feel that this may become the norm with the event becoming more diluted in the next few years. Asda suffered criticism last year after fights broke out in-store for discount goods and police have warned that they expect retailers to safeguard this from happening again this year. Asda along with Oasis, Primark and Jigsaw have all said they will not be taking part in the event
this year, but instead will offer a range of compelling offers from now until Christmas.
Their never knowingly undersold promise means that they are committed to the event and will need to price match offers from other leading brands.
REI, the US outdoor clothing specialist shocked the market when it announced that it would be closing all of its 140 stores and allowing staff to take to the outdoors instead, launching its #optoutside campaign. An interesting move and one that has brought them huge international PR attention as a result.
So what do retailers need to do to help achieve Black Friday success?
Retailers need to drop gimmicks and focus on delivering the basics really well to their customers:
- Competitive prices
- Easy access for customers across all engagement channels
- Personalised in-store experiences
- Digital engagement especially through mobile devices
Shoppers are becoming more sophisticated and they have a high expectation, and so the entire buying experience needs to be perfect from well-planned promotions, access to inventory, quick payments and fast guaranteed delivery of the items, as will an effective returns procedure. A proactive Black Friday strategy is critical to bottom line profitability and margin. However to win the long term race retailers will need to treat every day as a Black Friday opportunity from now until Christmas to stay ahead in today’s tough retail climate.
Will you be taking part in Black Friday or are you opting out? We would love to know your views, please add your comments below.
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