The Black Friday phenomenon has rewritten the rules for Christmas trading and bargain-hungry consumers are expected to bring a massive boost to sales again this year. Simon King reports
Although Black Friday has been steadily building momentum for a few years, it wasn’t until 2014 that it truly exploded on to the UK retail calendar. Like a tidal wave, it swept aside the traditional pattern of trade, creating a new November trading spike to rival the December run-up to Christmas.
The shock waves were still being felt throughout the first quarter of 2015, with electricals suffering from a prolonged New Year hangover as a consequence. According to digital commerce consultancy Salmon, this year’s Black Friday could be the UK’s first £1 billion online shopping day. There is no doubting the significance of Black Friday for retail and electricals in particular, but with many retailers bemoaning its effect both on margins and in subduing January trade, what, if any, are the benefits of the occasion and what can retailers do to make the most of them?
David Alexander, a retail consultant at retail research agency Conlumino, says: “Research conducted by Conlumino, in partnership with retail property specialists Hammerson, found that 53 per cent of last year’s Black Friday shoppers intend to do even more of their Christmas shopping at that time this year, as promotional fever is set to strike once again on November 27.”
The Conlumino/Hammerson research found that 42 per cent of last year’s Black Friday shoppers were making Christmas purchases earlier than usual, so the biggest impact on retailers will again be Christmas sales being brought forward. That said, the Conlumino/Hammerson research found 41 per cent of Black Friday shoppers got carried away with the discounts on offer and spent more than they had intended. Clearly then, the opportunity to satisfy bargain-crazy shoppers is potentially a very lucrative one. Conlumino’s Mr Alexander says: “As the first major event on the festive retail calendar, Black Friday is now a key window with which to attract shoppers, before they exhaust their Christmas shopping budgets. Capturing that spend and maximising it, while it is still available, is therefore crucial.
“Retailers should be doing all they can to promote the full extent of their offer. For example, by recommending complementary purchases and encouraging additional spend through multi-buy promotions.” Much of the hype around Black Friday has centred on its effect on Christmas gift purchasing, but in 2014, over half of consumers (53 per cent), according to the Conlumino/Hammerson research, actually used the occasion to buy discounted products for themselves. Mr Alexander says: “Understanding the underlying motivations behind many Black Friday purchases is likely to be key to ensuring retailers are able to tailor their offers correctly.”
“Black Friday is now a key window with which to attract shoppers, before they exhaust their Christmas shopping budgets.” David Alexander
Black Friday’s role in the run-up to Christmas is obviously important, but retailers must remember that a sizeable proportion of shoppers will be treating themselves rather than buying gifts. As such, they are likely to have different purchasing priorities and different products in their sights. As a result, big-ticket products that are not typically associated with gifting, such as domestic appliances, have an opportunity to come to the fore.
The £1bn milestone will be driven by the growth of online shopping generally, alongside an increased awareness of Black Friday and the deals available. Conlumino’s Mr Alexander says: “Cutting through the promotional white noise is likely to be critical to getting noticed this Black Friday. Clearly consumers will be on the lookout for the best deals, but with so much promotional activity going on, it can be hard for them to separate out those which offer the best value. This is when other factors like customer service, aftercare, guarantees and warranties come into play.
“For example, giving shoppers the help they need to buy the appliance that’s right for them, be that through helpful, impartial advice or finance packages, or offering them the reassurance that their purchase will stand the test of time, could be the difference between closing a sale and losing out to better prepared rivals.”
Black Friday is set to be even more crowded and competitive this year, so it is vital that retailers are flexible enough to respond when rivals attempt to steal a march on them with more compelling offers. This is likely to involve careful monitoring of the competition, but also the flexibility to shift the promotional schedule around. This could be achieved, for example, by having mechanisms in place to move deals earmarked for the January sales to Black Friday instead.
Mr Alexander says: “Of course, the balance here is to ensure that this flexibility in responding to competitor activity does not have a significant further impact on margins.”
“It’s not ideal, but it’s something that the industry has to embrace.” Andrew Denham
Speaking to ERT at this year’s IFA trade show in Berlin, Andrew Denham, managing director of Panasonic UK and Ireland, shares his views on Black Friday. He sees it as “an inevitable change in the market” and points out that while we have always had the Boxing Day sales, Black Friday has now brought those forward to an earlier phase. Mr Denham adds: “It’s not ideal, but it’s something that the industry has to embrace. It’s there and it’s a matter of how you position yourself within that as a retailer and make it work for you.
“Ultimately, if everything’s negative-margin, then it’s not a very clever move. It’s about how you give value to the customer, but make sure you retain some value for you as a retailer as well.”
Longer-term, consumers may well succumb to promotion fatigue as the discounting calendar becomes increasingly crowded. Mr Alexander says: “For now though, Black Friday’s position at the outset of the festive season, means that it is a pivotal period for retail and as the occasion’s star category, electricals are set to take centre stage once again.”
Alun Vaughan, managing director, Vaughans, south Wales
“We have massive plans for Black Friday. We did it last year and the year before and this year it will be the biggest weekend of the year for us. You have to be involved; you’ve got no option. People are looking for Black Friday deals and we will promote it in our adverts and on our website. It definitely boosted sales for us and I don’t think it brought a lot of sales forward. You have no option but to do it. Manufacturers will be offering Black Friday special deals. It will be huge. And last year, the activity went on from the Friday until the following Tuesday. We’re 100 per cent into that.”
Paul Mead, managing director, Michael R Peters, Bedford
“I have mixed feelings about whether Black Friday is good for the electrical retailing industry. From a promotional point of view, yes, of course, it can present a huge increase in website traffic, which could result in an increase in foot flow – depending on what and how you promote – and a substantial increase in turnover, albeit at a vastly reduced margin. On the flip side, manufacturers can get caught out, resulting in little or no stock following the upsurge in sales. We will promote Black Friday by running online promotions. However, we will look to drive customers in-store, so that we can sell up and add value. This year we are planning on blacking the windows with ‘Black Friday offers – when they are gone, they are gone’. While we will run Black Friday offers this year, I was left speechless to see the media last year showing scrums for £199 Polaroid TVs in supermarkets, with people getting trampled on and children being crushed, with no sense of organisation whatsoever.”
Andrew Thomas, owner, AF Thomas Electricals, Newport
“Black Friday is good for the electrical retailing industry. It can only bring attention to the retailer – profitable or not. If we don’t do it, someone else will. Prior planning is essential with deals and stock availability from suppliers – and it’s key to promote Black Friday in local press and with in-store posters and leaflets. Increased volumes of product is great, but margin has to be achieved, albeit small. Give your suppliers as much notice of what you are planning to promote and ensure you have the stock within your business before the day. In my business, we didn’t participate in Black Friday last year, and we’ve learnt our lesson.”
Customers ‘go mad’ for bargains
GfK analyst Paul Carrington looks at the numbers from Black Friday last year…
Black Friday, traditionally an American retail event that followed Thanksgiving, has been growing in significance in the UK over recent years.
Last year saw it firmly move into the mainstream, with more retailers taking part and more consumer awareness than ever before. There was extensive media coverage of scenes in-store showing that customers literally “went mad” for Black Friday in 2014.
GfK Point of Sales weekly tracking data show that in the week of Black Friday, sales of TVs rose by 52 per cent in value compared with 2013. This number looks even more impressive when you consider the same week in 2013 recorded a growth of 14 per cent over the previous year.
We also saw a huge year-on-year rise in headphones sales, with a staggering value growth of 101 per cent. In addition to the in-store chaos, we saw on the news how many websites struggled to cope with the large volumes of internet traffic as consumers looked for the best online deals. The performance of many sites was affected, with shoppers reaching holding pages or queuing systems.
GfK figures also show that for every pound spent on TV in the week of Black Friday, 30p of it was spent online. In headphones, more than a third of the value spent was through internet transactions. Online sales of headphones grew 84 per cent year-on-year in this week.
Over in IT, Black Friday helped tablets achieve value growth of nine per cent year on year, which, although it sounds modest compared with the other figures, the weeks around Black Friday actually saw the tablets market in double-digit decline, such was the short-term boost to this market.
We also saw mobile computing grow 56 per cent year on year in value, a jump worth £12 million. With lots of exciting new products delivering growth at the moment, we look forward to seeing if this year’s Black Friday can top 2014.