Notes on Black Friday

How did it come about in the first place?

Black Friday was introduced in the US because Thanksgiving, which is always on the 4th Thursday in November, is a national holiday so many people took the following day off. To capitalise (literally) on the extra day of holiday and kick start the festive shopping season retailers began offering discounts on the Friday immediately following Thanksgiving, and so it was born.

Why’s it called Black Friday?

Aside from being on a Friday, there are a couple of possible reasons why it’s called black Friday.

  1. It is thought by some that this is the day of the financial year when some retailers finally make it into the black.
  2. The other possibility relates to the Philadelphia police department. Because of the rush by American consumers to avail themselves of the best deals, the PPD are thought to have given it the name Black Friday on account of the extra mayhem it caused on the day. Something that resonates with the memory of the scenes from 2014 in the UK.

Regardless of the name issue, did it lift businesses out of the red this year?

This year Black Friday is thought to have cleared £1bn in the UK. The shops were surprisingly empty but much of the action happened online. Regardless it has been a record year.

For shops with no online presence Black Friday will probably have been a let down and this alone should give pause for thought about why they have no online presence.

For online retailers Black Friday will generally have been a bonanza, although depending on the category, fierce competition and the resultant cost of sale may have helped drive down margins further still.

For shops with both an online and offline presence it could have been a mixed bag. A disappointment in store but with the online store picking up some of that absent footfall trade.

Is it a good thing?

It depends….

For consumers looking for a deal it can only be a good thing as retailers know they must present compelling offers. Added to which strong competition serves to drive prices lower still.

For retailers it will mean thinner margins and reduced profitability unless the focus is on offloading distressed inventory, but distressed inventory is distressed for a reason so if it wasn’t selling before, big reductions might not necessarily be the rout forward.

For online retailers, there are other risks.

  • Sites that crash or are incredibly slow
  • Couriers that don’t deliver on time

If users have a bad experience on a site not only will it affect the likelihood of a sale but it may also damage reputation and reduce the possibility of a return visit. In the run up to Christmas it’s important that users have a smooth online experience if retailers are to avoid loosing them to the competition.

Some websites even have to queue visitors as they try to gain access, in the same way visitors queue outside a shop. This can be seen as either good or bad: good because it whiffs of exclusivity in terms of the deals available, bad because it disrupts the customer journey in an environment where consumers are accustomed to unfettered access. On balance I think queuing to access a website will have a negative impact on the brand and makes a very strong case for load testing well in advance of peak periods.

Marketing costs also rise and many retailers will see their cost per click in search advertising spike around Black Friday as competition heats up. All this leads back to reduced margins and profitability.

By contrast it is an opportunity for retailers to grab new customers and grow market share, however research from Worlpay indicates that 70% of customers who buy from a site on Black Friday do not return again to make another purchase throughout the remainder of the festive season.

For society at large the benefit of Black Friday seems to be a growing talking point. This year the #buynothingday and #givingtuesday movements both had higher profiles while some retailers opted out altogether, see below.

The same survey by Worldpay found 1 in 5 respondents saying they think less of brands that participate in the retail mega event.

Where next for Black Friday?

There were some notable absences from the Black Friday line up of retailers this year, chief among them were ASDA and Primark. It’s a particular irony since ASDA is owned by Wal Mart and Wal Mart is, to some, extent credited with bringing Black Friday to the mainstream UK shopping calendar in 2013 using, as the vehicle, ASDA and its “Wal Mart Black Friday by ASDA” campaign.

Additionally other stores such as Fat Face are staging their own media stunt opt out by giving £250,000 to charity instead.

Some stores in America stayed closed on Black Friday.

Andy Street, chairman of John Lewis, has been a vocal detractor of Black Friday making the very reasonable point that cramming that much trade into a single day is harder than spreading it over five weeks. In addition it amounts to a race to the bottom [of the pricing and profitability scale].

Given this year’s results it seems unlikely that Black Friday is going anywhere and while a few bold retailers have opted out it remains to be seen how that decision will reflect in their financial results.

What lessons can be learned?

  1. Make sure your supply chain is robust enough to cope with the massive spike in demand
  2. Pay special attention to fulfilment and make sure that couriers don’t let the side down. They’re the third party supplier can have a big impact on customer perception of a retailer brand.
  3. For online retailers, do very thorough load testing to ensure the site doesn’t fail or slow down.
  4. Think carefully about marketing especially email which can cause traffic spikes that may put the site under even more load pressure.

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