Is Black Friday bad for UK retail?

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Black Friday is now a firm fixture on the retail calendar, despite coming to the UK less than ten years ago. Whether you love it or loathe it, opinion is mixed from retailers and consumers. The shopping bonanza was first launched in the US the day after Thanksgiving. Originally a one-day event, retailers now offer deals in the weeks up to and beyond Black Friday. The event was intended to kick-start Christmas spending, but critics argue that it’s actually bad for business.

Black Friday or Cyber Monday

In 2018, Black Friday falls on 23rd November with Cyber Monday landing on 26th November. Black Friday used to focus on electronics, whilst Cyber Monday offered deals on clothing and jewellery. However, now the lines are blurred with over half (55%) of purchases on electronics. Now, there is not much distinction between the two days, with deals running over the weekend period.

Changing consumer habits

Black Friday continues to grow, with 91% of UK retailers thought to have taken part in 2017. Meanwhile, Barclaycard stated that spending on Black Friday 2017 was 8% higher than 2016. This is significant because it shows how the event has changed consumers’ pre-Christmas shopping habits, having a huge effect on the retail industry.
 
There is little doubt Black Friday has dramatically changed the way people shop in the run-up to Christmas, and has created an expectation of deep discounts that arguably did not exist before.

James Miller, Senior Retail Consultant at Experian Marketing Service

Huge discounts may be good news for consumers. But this spending hasn’t given people more money to spend, they’ve simply changed when they spend it. How retailers respond is crucial in the battle for buyers’ budgets.

A struggling high street

As a predominantly online event, another impact is the way increased online sales affect an already struggling UK high street. Online spend by British households on Black Friday sales reached £1.4bn in 2017, up 11.7% from the previous year. This had a knock-on effect on the high street, with footfall figures down 3.6%. However, the impact may be worse than it looks. While shopping around for deals is easier online, the popularity of ‘click and collect’ ensures many shoppers reach the high street afterwards anyway. This can lead to additional impulse buys and unplanned purchases – potentially at full price. Some shoppers brave the crowds, with stores extending opening hours to meet demand. Retailers must prepare across all channels to take full advantage of the period, particularly to optimise cross-sale potential in store.

Risk to Christmas sales period

A further criticism of Black Friday is the adverse effect it has on the Christmas sales period. Disruption to Christmas trade is a big risk. However, recent reports suggest Black Friday has only a small impact on Christmas spending. A 2017 survey by comparison website GoCompare found that only 8% of shoppers planned to buy most of their Christmas presents in the Black Friday sales. In addition, a 2017 report by professional services network PricewaterhouseCoopers (PwC) found that shoppers expected to do only 20% of their Christmas shopping over the Black Friday period. With 55% of women and 71% of men saying that they would be buying for themselves, the Black Friday period actually appears to eat into Boxing Day spending instead.

The pros and cons of Black Friday

In 2017, the Office for National Statistics reported Black Friday helped drive a 1.1% increase in the number of goods purchased. This contrasts with fears that spending is short-lived and leads to weaker sales in the traditionally strong December period. With Black Friday becoming customary, retailers must address the advantages and disadvantages of this new shopping tradition:

Pros

  • Generates increased traffic and sales

  • Upselling and additional (full price) sales opportunities

  • Customer growth

  • Earlier (pre-Christmas) fulfilment

  • Opportunity to clear stock

Cons

  • Discount pressure

  • Erosion of margins

  • Highly competitive

  • Potential return stock

  • Spending habits: consumers wait for discounts

In response to these challenges, some retailers have decided not to take part. In recent years, leading brands such as Marks and Spencer, Fat Face and Asda have all opted out. While consumer shopping habits have undoubtedly changed, Christmas shopping will always extend into December. The fear of people completing all of their purchases during the event has proved unfounded. Instead, shoppers are more likely to research and prioritise key purchases.

In Summary

Black Friday is now an established event in the retail calendar, alongside the Boxing Day and January sales. Retailers now understand the challenges involved and are able to adapt their approach to optimise sales. Shoppers are also smarter at identifying worthwhile deals. Overall, Black Friday can be viewed as positive for the sector:
 
Anything that helps to encourage consumers to go shopping and supports the retail sector is a good thing.

Kien Tan, Director of Retail Strategy at PwC

Retailers are better prepared than ever, and there are benefits for those who can successfully strike the balance between discounts and stock levels. Stores can look after margins and generate extra sales through careful planning and a longer, steadier period.

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