As Black Friday shifts online, retailers are feeling the pressure and looking to more efficient and creative ways to deliver products.

Retailers and logistics companies are finding ever more ingenious ways to get products to customers, as fast as possible. And the need is urgent, if Black Friday is anything to go by. This year the discounting bonanza moved online like never before; 40% of Visa transactions were made online, 55% more than on a typical Friday. And the trend is only going in one direction.

Sainsbury's Black Friday

It’s not much of a stretch to imagine in the coming years that online will represent more than half of Black Friday transactions. It’s a pinch point that could get much more painful for retailers whose infrastructure can’t cope with the ever-increasing demands of shoppers around convenience. Online sales are generally more expensive to fulfil, particularly when considering the costs associated with returns, which are usually more common among online shoppers.

Turning a profit when it comes to ecommerce is getting more difficult, particularly for multichannel retailers that also have the overheads of stores to worry about. To some it came as no surprise when John Lewis began charging for click-and-collect orders under £30 earlier this year.

Managing expectations

When retail supply chain consultancy LCP asked its multichannel clients what they thought of Black Friday from a logistics perspective, a third said they thought it was “unprofitable and unsustainable”.

Morrisons Black Friday

The amount spent online on Visa cards grew 23% year on year to £760m on Black Friday, while in-store spend dropped from £1.14bn to £1.13bn. Figures from the British Council of Shopping Centres and Springboard showed footfall was down every day of the Black Friday weekend and on Cyber Monday.

With store sales and footfall heading in the wrong direction, multichannel retailers could find it harder to compete with their pure-play rivals. So how can retailers adapt to ever more demanding customer expectations and, crucially, maintain their profit margins?

Managing expectations is vital. Last year scores of retailers’ fulfilment arms fell over after over-promising when it came to delivery. This year, retailers were more realistic and as such most managed to keep out of the headlines.

Fulfilment firm Yodel says this year Black Friday was much better organised. It agreed with retailers in advance the number of parcels that would be accepted into its delivery network each day over the weekend of Sales. It also placed limits on next-day delivery capacity.

Argos Black Friday

It said it had invested £30m since last Black Friday to improve efficiency and capacity, including better mechanical handling systems and a larger fleet. As a result, its own customer satisfaction survey showed 86% of online shoppers had a ‘positive’ delivery experience, compared with 73% this time last year, when it had to suspend collections from distribution hubs after an unprecedented surge in demand.

And spreading the promotions out over several days – in some cases weeks – also helped with the sheer volume of orders being processed. This year it seemed there were fewer serious web crashes as a result.

Store-to-door demand

John Lewis Black Friday

As the proportion of online orders grows over the promotions extravaganza, retailers will have to look to more ingenious ways to get products to shoppers. Drone deliveries, moped couriers and sprinters armed with rucksacks – no fulfilment option is off the table any more. Cue the rise of a new generation of fulfilment providers. On both sides of the Atlantic the likes of CitySprint, Shutl, Deliv, even taxi firm Uber, are getting in on the act.

Amazon and Walmart have got the green light to test drone technology for customer deliveries and store replenishment; and there are new services such as Doorman.co, which will take online deliveries during the day and bring them to customers in the evening.

LCP Consulting retail partner Stuart Higgins says one of the next big trends is very likely to be retailers looking to run their own logistics operations, as Amazon does. “As retailers’ volumes increase and their online operations get bigger and bigger this will become more realistic,” he says.

“Retailers have to take a very serious look at the overall economic performance of all their assets, and think very carefully about their stock and what they are going to offer on discount”

Rob Fenton, Fifty-Five

Fulfilment is more important than ever, but it doesn’t end there. Rob Fenton, managing director of online data consultancy Fifty-Five, points out that retailers also have to manage the level of discounts they are giving carefully.

“Retailers have to take a very serious look at the overall economic performance of all their assets, and think very carefully about their stock and what they are going to offer on discount,” he says. “You have to be really careful about how you are managing your volumes and not damaging like-for-like sales or margins.”

Strategic thinking 

M&S Black Friday

David Chalcraft, principal lecturer in marketing and business strategy at Westminster Business School, says for retailers to keep going down this road and maintaining profit margins, they need to think in a new, more strategic way.

He says: “I think they will be able to do this in a sustainable way, but they have to manage their online and offline channels together, not independently. They need to think on a more strategic level, and think about how they can leverage discounted items to drive full-price sales. That’s how they will drive profits.”

“Retailers have to manage their online and offline channels together, not independently”

David Chalcraft, Westminster Business School

Data from etail industry body IMRG, from a sample of its members, shows that while sales of discounted goods increased 180% on Black Friday compared with last year’s performance, non-discounted goods sales also grew 24%.

There’s not much retailers can do about the public’s insatiable appetite for discounts, but there are plenty of ways that they can tighten up their own operations to be ready for the future.

Kantar senior vice-president and knowledge officer for EMEA Bryan Roberts says one of the ways that retailers can be strategic is in how they plan their stock control. He says: “Etail businesses are designed to bear the extra costs such as home delivery at a time like this, but for traditional retailers that have branched out into ecommerce this is harder. Some retailers will need to collaborate with their suppliers to buy Black Friday-specific stock just for the event.”

Peter Courtney, property consultancy Lunson Mitchenall’s London divisional head, says: “Certain things just aren’t sustainable. Black Friday is setting the tone for Christmas and that’s the issue for retailers. They need to maximise their margins.”

The finale to the retail year has been rewritten. Black Friday has turned traditional festive trading patterns on their head, impacting the timing of Christmas shopping and also the channels through which it is done.

If – or more accurately, when – online sales overtake stores on Black Friday, it will be an important step in the evolution of etail but one multichannel retailers need to be braced for.