Black Friday and Retailers

In the run up to Black Friday – Friday 25th November 2016 – Menzies Head of Retail, Roberto Lobue spoke to the Retail Gazette on the value of this once a year retail phenomena and how UK retailers are responding to it.

What is Black Friday?

Menzies microscope iconStarting in the US in the 1930’s, Black Friday is the day following Thanksgiving Day (the fourth Thursday of November) and has been regarded as the beginning of the US Christmas shopping season. For most major retailers, Black Friday means opening very early and offering amazing discounts both in-store and online.

In recent years, Black Friday has made it’s way ‘across the pond’ to the UK and thanks to e-commerce has transformed this event into one of the most hotly anticipated events of the retail year.

How important is Black Friday for retailers in the UK, and which sectors are most impacted by the event?

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Roberto Lobue - Menzies AccountantIt is common for the UK to follow in the footsteps of popular American trends and Black Friday has now become an important date in the UK retail calendar. It is thanks to the global reach of certain US companies, such as Amazon, that it has begun to significantly affect the UK retail space.

Last year it is reported that consumer spending reached over £1 billion – the first time that this figure has been reached in the UK on a single shopping day. Consumers are now delaying purchases, which may have otherwise taken place at any time during the year, in order to take advantage of Black Friday savings.

Technology retail continues to prove the most popular among customers who are looking for substantial savings for electronics and gadgets and it is likely that businesses in these sectors will remain high on consumers’ radars this year.

Last year, several companies who boycotted Black Friday reported worse like-for-like sales in comparison to the year before, whereas those retailers who chose to partake, such as John Lewis, saw record spending levels. However, ensuring sufficient forecasting takes place to manage stock levels, customer demand and setting the right price point will help to minimise risks and protect margins.

How can retailers predict which items will be in highest demand over the period?

Menzies icon of a shopping basketUp until a few years ago, retailers were going into Black Friday blind, but now most businesses will have at least two years of records at their disposal. Analysing historic performance data is a good place to start and can help to identify peak periods, categories and types of deals which are likely to be most popular. Using historical information to forecast likely volumes of orders and site visitors will help better prepare companies for the upturn in sales.

Conducting demographic profiling of previous customers will also aid the communications strategy surrounding Black Friday and identify what a business’s typical customer seeks during sale periods. This will help to determine what deals are likely to work better, what discounts are most likely to cut through the competition to encourage purchase and how to best reach potential customers.

As retailers are now extending Black Friday for up to a whole week, companies are able to spread the demand and ensure that stock levels are more accurate. Introducing a ‘pre-ordering’ function will help retailers to gather real-time data on demand levels. Alternatively, allowing consumers to ‘register interest’ in a particular product or deal ahead of Black Friday sales will allow retailers to reduce the risk of being left with surplus stock.

Is it possible for retailers to do badly out of Black Friday? If so what measures should they take to avoid this?

Black Friday can be a high-risk high-reward activity for retailers, but if appropriate planning and preparation is conducted, the rewards can be well worth it.

There are many retailers that hate Black Friday. Traditionally, discounts weren’t offered pre-Xmas and the sales didn’t start until Boxing Day or early January, but the introduction of another cost-saving event has the potential to significantly affect retailers’ margins and skew the sales data for the entire year. Additionally, Black Friday puts substantial pressure on operational systems, logistics, IT and staff, and careful management of all aspects must take place in order to protect margins and safeguard reputation.

To avoid common pitfalls, retailers must:

  • Prepare early
  • Have a plan
  • Truly commit in order to reap the benefits.

Retailers have to find the right balance between providing enticing discounts but not cutting margins on all product lines. Ensuring that the appropriate systems and staff are in place to handle demand is vital and it is advisable that contingency arrangements are considered should demand exceed expectations.

Having the website crash on the busiest shopping day of the year can cause operational and reputational damage.

What are your predictions for the scale of this year’s BF following Brexit?

2014 saw fights breaking out in stores as people tried to get their hands on the best deals. In 2015, the traffic moved largely online with many websites struggling to cope with visitor volume. With the impact of Brexit yet to be really felt, 2016 is likely to be even bigger with the deal period more than likely to extend to over the weekend or for the entire following week. The introduction of Cyber Monday is an example of retailers extending the shopping period to reduce disruption and strains on their infrastructure and systems.

Finding solutions to minimise disruption, manage demand and capitalise on the sales period whilst protecting margins is likely to be an ongoing feat for retailers for years to come.

Find out more about Menzies Retail sector expertise.

For more information about this feature or Menzies Retail expertise get in touch with Menzies Partner Roberto Lobue by emailing or by phoning 01252 894915.

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