Black Friday’s high-profile promotion caused logistics chaos for some retailers but presents undeniable opportunities for others.
Black Friday caught many retailers off guard. Websites crashed and logistics providers were unable to manage order fulfilment.
Marks & Spencer’s ecommerce fulfilment centre at Castle Donington struggled to manage the spike in orders, and this will have added to its online annus horribilis.
The risk of a poor last mile experience can undo all of the good things a retailer does on the front-end and initial customer engagement experience and can be the biggest driver of customer churn as well as fuelling negative sentiment on social media.
The consequences of Yodel’s inability to fulfil orders post-Black Friday also led to a subsequent drop in demand pre-Christmas. It dented consumer confidence in the likelihood of online orders being fulfilled in time.
The likely beneficiaries of this drop in online demand were retailers who have a solid cross-channel proposition with click-and-collect as a viable alternative to home delivery.
The big question is whether or not Black Friday increased overall sales demand or merely shifted the timing. And, of course, what was the impact on margins and profitability?
It certainly brought cash in. However, a lot of the revenue was sales that would have been generated earlier in October or November or in December.
Demand shift is a big risk associated with Black Friday. If customers are already planning to buy in October or November, there is a risk that they will hold off for a period of time in the knowledge they will get a sizeable discount if they can wait for a few weeks. This could ultimately lead to a reduction in propensity to buy.
It would appear that margins were not affected as much as expected because most retailers’ discounts and promotional activity will have been planned into budgets since the beginning of the year.
White Stuff and Ted Baker are just two of the retailers that took a full-price trading stance and subsequently delivered solid margins and healthy trading performance – sales were up 17.9% and 22.8% respectively over the Christmas period.
One opportunity that Black Friday does provide is in fashion. The impact that the unseasonal warm weather had on retailers in autumn may well become a more common story as the weather and seasonal changes are far less predictable.
Therefore Black Friday also presents an opportunity to leverage an earlier Sale to drive sell-through on autumn/winter products.
The origins of Black Friday are as a US-based Sales event occurring around Thanksgiving – a big US public holiday. Comparatively, Sales activity around Boxing Day has always had far less impact in America.
In the UK we have tried to have both, and unsurprisingly consumers haven’t bought into this in the way retailers hoped. Sales demand has been shifted from Christmas, when retailers would undoubtedly have enjoyed better margins as well as losing out on the Boxing Day sales spike.
- Martin Newman is chief executive of Practicology