As a shopper, I thought Black Friday might be a good opportunity to pick up a new TV that I’ve had my eye on at a bargain price. However, when I checked the small print on the pricing, it turns out that the Black Friday price was actually the price the TV had been available at two months ago, before the retailer artificially ramped the price up in order to be able to offer a massive “discount”. And, I am not the only one to have experienced this. I’ve seen press reports from across Europe about any number of other cases of false discounting around Black Friday. It doesn’t really inspire consumer confidence in the event or the retailers involved.
Black Friday 2016 seems to have been a very mixed bag. There have been reports that online sales were up significantly on previous years, but not by as much as some of the more enthusiastic predictions. Confusingly, we’ve also seen reports that footfall was up in shopping centres but trade through bricks-and-mortar stores seems to have been down both in the USA and Europe. So, what is really going on and how is it impacting on retailers and the logistics sector?
Well established as a sales period in the US, Black Friday is a relatively new phenomenon in Europe, arriving in UK in 2013 largely courtesy of American-based global retailer chains Amazon and ASDA/Walmart. In 2014 UK retailers really got on the bandwagon and we saw reports of shoppers fighting in bargains in stores, but 2015 retailers scaled back and sales figures were well below projections. Which brings us to 2016.
At the same time, the phenomenon has also been growing popularity across Europe. The Italians have experienced a similar gestation to the UK, the Czech Republic adopted it in earnest two to three years ago, France has seen it as a major sales driver for first time this year.
In the US, the date has particular meaning as it’s the day after the major Thanksgiving celebrations - themselves a major focal point for retail sales. With the day after Thanksgiving being a holiday for most Americans, it made sense for retailers to try to encourage them into the stores with discounts ahead of the start of the Christmas shopping period.
In Europe of course we don't really celebrate Thanksgiving, so the specific date has less traction. It is not surprising, therefore, that on this side of the pond at least Black Friday has quickly become a largely online event. Indeed there were widespread reports of shops that had opened early (in some cases at 5am) and brought in additional staff to cope with the crowds of shoppers having only a handful of visitors. This is obviously costly for the retailer.
Without the “day after Thanksgiving” focus, European retailers have also increasingly pushed Black Friday out from a one day sales event to the whole weekend (“Black Fiveday”) or even longer (in some cases as to 10 – 12 days). Even 10 days, my inbox is still filling up each morning with “Black Friday” offers.
In the UK it has been suggested that the level of deep discounting required to compete on Black Friday means many retailers - particularly smaller independents - find it difficult to make a profit but they also feel that they can't afford not to be part of it. We haven’t seen the same reports from mainland Europe, but this might be one to watch in future years.
Neil Ackerman, Global e-Commerce Director of Mondelez International, whose presentation about how to succeed in online retailing was one of the highlights of the recent P3 Future Business Trends Conference, tells me that he thinks it's a matter of retailers getting the balance right in terms of the fundamentals of timing, pricing and selection in order to make Black Friday sales a success.
But what does the massive spike in sales around a specific date like Black Friday mean for the logistics sector?
Obviously it does put some pressure on the supply chain, but Neil pointed out that for most retailers it is already planned in, with most retail logistics facilities tending to operate at around 60% of capacity most of the year, moving up to 95% over the Christmas period.
Also, as many people are shopping for Christmas presents, they are not so concerned about immediate deliveries. There is, therefore, some flexibility to promise a delivery window before Christmas and charge a premium for early delivery. Neil believes that it should still be possible to get all Black Friday sales delivered within 2 – 5 days.
One thing that Neil believes is essential is that retailers make the most of the “treasure trove” of data about their consumers that result from Black Friday sales – ensuring that they use it in 2017 for more precise targeting of future offers and marketing in order to improve their relationship with their customers and provide an improved, more personalised service.