Black Friday should not just be an opportunity for retailers to follow the herd – instead, they should develop their own marketing and pricing strategies focusing on delivery practises.
The UK version of Black Friday does not have a Thanksgiving holiday to anchor the period allowing flexibility and variety in how promotions are timed and structured. Taking advantage of this will allow retailers to optimise their sales and margins over the whole Christmas period, according to Nick Miller, Head of FMCG at global management consultancy Crimson & Co.
According to research from Adobe, Black Friday 2016 was a record-breaking year for online sales in the US, with $3.34bn spent online and a 17.7 per cent increase on sales from the 2015 period. In the UK, Adobe reported that online sales hit £908m on Black Friday meaning that delivery strategies are put to the test.
In recent years, Black Friday has significantly grown to a size that retailers can no longer ignore. Without the actual Thanksgiving day, UK businesses have more opportunity to increase sales. However, simply applying huge discounts to maximise sales is increasingly not the smartest move. With margins already tight, giving away more hits the bottom line, a unpopular strategy with shareholders who are increasingly focused on profitability rather than sales growth. More than ever, it appears that Black Friday sales cannibalise later, higher margin sales.
Maximising sales and footfall has other side effects, several retailers have scaled back on the shopping frenzy after unwelcome incidents on previous Black Fridays. Instead, firms have looked to spread the shopping experience across the entire festive period to include 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 seventh 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 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 fell over each other and physically fought one another for what was perceived to be must-have bargains. These scenes 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. Because of this, firms should be looking to develop their own strategies to maximise overall margins and profitability, through understanding their customer base and their shopping behaviours.
Another challenge facing retailers is their delivery strategy for home shopping. Research from the Department for Transport indicates that average morning speeds have dropped as our roads become ever more congested. A lot of the blame for this is directed at the sharp rise in internet shopping with delivery drivers increasingly taking up space on the road. Amazon has compounded 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 caught out a lot of delivery firms 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 will put enormous pressure 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 faster 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 consumers’ convenience, therefore avoiding the melee caused by fragile delivery strategies.”