The Black Friday effect: Right or wrong for retailers?

The discussions about the effects of Black Friday are clearly continuing to shape many discussions across the retail industry and there are mixed views on whether it was an entirely positive experience. With customers driving many of the current trends we see in retail, it is interesting to consider whether retailers really had any choice in bringing Black Friday to the wider UK marketplace. I think it is safe to say that the majority felt that they needed to embrace the initiative and whilst that is true, there are a number of things that need to be considered if they plan to run a similar event later this year.

The history of Black Friday and why now?

As most people are aware, Black Friday originated in the US and was first introduced to the UK marketplace by Amazon in 2010. Yet it has taken four years before the wider retail marketplace decided to join in on the party, perhaps as the pressure from consumers to adopt the promotion finally took hold. What is certainly true is that there is a strong ‘follow my leader’ approach when it comes to retail trends and it only takes a few big brands to jump on the bandwagon and many more will simply follow suit, because they really don’t have much choice. Consumer demand is a hugely influential vehicle and most retailers wouldn’t want to risk losing potential business, website traffic or store footfall simply by refusing to participate. After all, it’s only for a day isn’t it?! Perhaps not.

Black Friday 2014

The UK experienced it’s first major Black Friday in 2014 and it made the headlines for many of the wrong reasons! There were several stories of riots, customer rushes, damaged stock, injured people and police called out as consumers rushed to take advantage of the cut-price deals on offer. The picture online wasn’t much different, with major retailers like John Lewis and Argos facing extended website downtime after demand caused their systems to crash.

That said, the results perhaps suggest it wasn’t all doom and gloom. According to econsultancy.com, in 2013 UK Spend jumped 44% between Thursday to Black Friday, however in 2014 it jumped 144%. On Black Friday itself, UK shoppers spent £810 million and 404,835 orders were made online. This surpassed the estimated £555 million shoppers were expected to spend. Amazon sales were up 63% and eBay sales up 84% from 2013 which shows that Black Friday helped to increase UK sales on the day.

BarclayCard also reported a four-fold increase in electronics spending as consumers rushed to purchase discounted electrical products. Furthermore, Barclaycard also announced that their customers had spent 18% more in 2014 than 2013.

Retail intelligence experts said that the number of shoppers in the High Street, shopping centres and retail parks would leap by 10% and footfall was expected to increase with the growth in popularity of ‘click-and-collect’ purchasing. They also predicted that footfall would spike +9.3% on Black Friday and +3.2% on Cyber Monday.

The spiral effect

Whilst the figure would suggest that retailers have indeed benefitted from Black Friday, the longer term impact is not quite so clear. Professor Chris Edger was quoted as saying that the level of discounts being offered would only serve to ‘suck out any profit from the November margin’ and that ‘profitability in the long term would inevitably fail’. We know that historically, promotions do tend to have a long-term impact and customers simply get used to the discounted prices and in many cases, refuse to return to purchasing at the RRPs. Let’s explore some of the potential long-term implications of Black Friday-style promotions.

1. The customer experience – We know that customers are increasingly demanding more from the customer experience and excessive waiting times in stores, IT downtime at the tills and lagging or even failing websites can all impact the customer experience. Many might have been attracted back to a retailer or are experiencing them for the first time during Black Friday and experience a less than optimal service. What long-term impact will this have if for example, this customer decides their experience on that one day is reflective of what they will experience in the future and simply don’t bother visiting again?
2. Fluctuating sales – Whilst the retail industry does experience significant peaks and troughs throughout the year, is it really productive to create more than is absolutely necessary, especially with such short promotional windows? The added strain on store systems, the staff and even the logistics/warehouse/delivery functions means that the knock on effect could potentially penetrate the entire organisation. Cash flow and violent fluctuations in business are dangerous ground for retailers and so it could be argued that the natural lull in business following Black Friday was more damaging than not being involved in Black Friday at all, or at least to a lesser extent.
3. 2015 sales outlook – Customers have now had a taste of what they can expect prior to Christmas. They know they can potentially save hundreds of pounds on that wide screen TV they really want for example. So do you think they are going to be lured in by your 10% off promotion at Easter or your summer offer? There’s a huge risk that many of the natural purchases that would have happened throughout the year may now not occur as people save up and wait for the big Black Friday discounts later in the year.

2015 Black Friday recommendations

So what can retailers do to benefit from the perks of Black Friday, but avoid the negative aspects? It is going to be a tough call and one which may take a few cycles to perfect, but from a customer service and IT maintenance perspective, I would recommend the following:

1. Limit your Black Friday offers – Whilst there is the temptation to slash prices across a range of items to ensure you target a wider customer demographic, it may be more practical to consider a limited range of products, so that you are still participating but it’s unlikely to impact too many of your product lines and promotions.
2. Evaluate IT, store and logistics requirements ahead of time – Managing the influx of demand during promotions like Black Friday is essential to the smooth running of the campaign, so ensure you have fully evaluated your online and offline IT requirements ahead of time.
3. Keep customers informed – Managing customer expectations can be the difference between a good experience and a negative one, even if you can’t avoid IT downtime or delivery delays. If customers are kept informed and feel that you’ve done everything possible then they are far likely to feel disappointed or let down by the service.
4. Ensure your marketing extends beyond just Black Friday – As mentioned earlier in this article, keeping your customers engaged throughout the year is key to sustaining sales, so make sure that you don’t put all of your eggs into one basket when it comes to Black Friday. Keep them engaged, interested and inspired with regularly communications, loyalty incentives and special promotions that will entice them to shop with you all year round.

Alan Watson is the managing director of Barron McCann.