Black Friday should not just be an opportunity for retailers to follow the herd – instead, they should develop their own marketing and pricing strategies. Doing this, combined with inventive delivery practices, will allow them optimise their sales and margins over the whole Christmas period. This is according to Nick Miller, Head of FMCG at global supply chain consultancy Crimson & Co.
Industry research from the Centre for Retail Research indicates that 2015 is expected to see internet sales, as part of the Black Friday phenomenon surpass £1bn for the first time in UK history, with total sales (including in stores) reaching £1.39bn and shopping over the entire weekend nearing £3.5bn.
Fear of missing out has grown the retail bonanza of Black Friday into an event of a scale which retailers cannot ignore. However, simply applying huge discounts to maximise sales is increasingly not looking like the smartest move. With margins already tight, giving away more hits the bottom line – shareholders are increasingly focused on profitability rather than sales growth. More than ever, it appears that Black Friday is cannibalising later, higher margin sales.
Maximising sales and footfall has other side effects: leading supermarket Asda has already said that it is massively scaling back on the shopping frenzy after a number of retailers reported unsavoury incidents amongst customers during last year’s sales. It said that it didn’t want its customers to feel held hostage by the experience of one single day of sales and instead announced that more than £26m in savings would be spread across the traditional seasonal shopping period, including food and drinks, as well as electronics.
In light of this Miller believes that more savvy retailers could look to follow suit: “Black Friday is now into its fifth year here in the UK and by all accounts it is going to be the biggest to date. Combined with Cyber Monday it is has transformed the entire Christmas shopping experience, resulting in retailers being forced to realign sales, marketing and supply chain strategies in order to capture frenzied consumer demand.
“Last year, such was the hype for Black Friday that when the doors opened for a lot of retailers, customers were falling over each other and physically fighting one another for what was perceived to be must-have bargains, leading to a number of unpleasant scenes which were widely documented in the media.
"For a lot of retailers, quite rightly the negative connotations surrounding this are forcing them to rethink their strategies. Asda has already acted and others are likely to follow. Firms should be looking to develop their own strategies to maximise their overall margins and profitability, through understanding their customer base and their shopping behaviours."
Another challenge facing retailers looks at delivery strategies for home shopping. Research from the Department for Transport has indicated that the public is now seeing average morning speeds drop as our roads become ever more congested. A lot of the blame for this is being pointed at the sharp rise in internet shopping with delivery drivers increasingly taking up space on the road. Amazon has added fuel to the issue with the launch of its new one-hour delivery service, leading to a number of retailers being forced to rethink their delivery protocols.
Miller continued: “Delivery strategies have always been a challenge for retailers. During last year’s Black Friday the surge in sales naïvely caught a lot of delivery firms flatfooted and they simply couldn’t cope with demand. Looking ahead to this year the expected rise in sales, increased congestion on the roads and demand from consumers for ever-quicker delivery services is going to be putting enormous pressures on retailers to not suffer a similar fate.
“To avoid this, these firms need to start thinking a lot smarter and a lot more creatively. Forming new partnerships, for example with taxi firms or even competitors, will enable them to meet customer demand quicker and more effectively. Also, further innovations in click and collect mean customer drop off points could be established at key areas such as schools, gyms and train stations, so orders can be picked up at a consumers convenience, therefore avoiding the melee caused by fragile delivery strategies.”