The Retail Note | Black Friday: the most ridiculous time of year
6 minutes to read
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This week’s Retail Note attempts to say something new about the biggest folly in the retail calendar.
Key Messages
- Black Friday itself is on 29 Nov…
- …but it has become elongated to the point of being irrelevant
- Level of noise disproportionate to the level of activity
- Noise amplified by so many non-retail operators
- Growing realisation that ‘deals’ are not all they are cracked up to be
- 9 in 10 ‘deals’ are at same or lower price at other times of year
- But still damaging for retailers’ gross margins
- Many retailers will declare Black Friday a triumph
- Real ‘winners’ likely to be those that don’t partake (M&S, Next, Primark)
- Black Friday likely to be captured in Dec rather than Nov retail sales stats
- Triple cost whammy of Autumn Budget…
- …vs self-imposed Black Friday pressure on the bottom line.
In case you’re just returning from a trip to outer space, today is Black Friday. A one day retail extravaganza, where shoppers flock to stores and buy loads of bargains. And retailers laugh all the way to bank.
Your visiting outer space is more likely and plausible than any of the above. Black Friday is anything but a one day event. Retail is now a bit-part player in a bandwagon that every walk of life has mindlessly jumped on. High street footfall is unlikely to spike today as many consumers have wised up to the fact that supposed bargains aren’t bargains at all. And for those retailers that still embrace it, they are either taking a financially crippling hit to gross margin, or conning their customers and risking long term collateral damage to their brand. And for the more self-respecting retailers, it is little more than an exercise in damage-limitation.
What’s wrong with Black Friday and what, if anything, is different this year?
What’s wrong with Black Friday?
The enlightened may already have detected a mild disdain on my part towards Black Friday. Those that may have read my missives on the subject in previous years will have seen the full force. Rather than cut and paste previous efforts, a short summary as to why I see it as one of the most damaging forces to the industry that I represent.
In essence, it can no longer be just a one day event, because of the huge disruption and commotion this causes, both in-store on the day and in terms of online supply chain bottlenecks. Rather than dispense with it altogether, retailers have just extended it out over a protracted period – an ever longer one. Not just a day, not just a week-end, not just a week, but a whole month. A whole two months even.
The risk of this is that it loses relevance as the impact is diluted. And any ‘bargains’ are just built into a rolling programme of promotions that would have happened anyway. Effectively, retailers have killed the goose that didn’t lay any golden eggs in the first place.
But that is not happening quietly. The noise around Black Friday amplifies each year, with retailers shouting louder, the less they have to shout about. And, of course, the noise is deafening from all sides, every marketing department of every B2C business in the land showing their lack of imagination and screaming Black Friday deals at every available opportunity. Big call out here to the mobile network providers, who excel in this area. But their Black Friday ‘deals’ being largely no different from ‘deals’ that they offer at any other time of the year.
And that circles back to retail. Are ‘bargains’ all they seem? Clearly not, as there is growing evidence to support. Research from Consumer group Which? has reinforced what many of us have long suspected - nine out of 10 Black Friday offers are cheaper or the same price at other times of the year. So, only 10% are true ‘bargains’. But enough to damage the gross margins at the most crucial time of the year for those retailers that do partake in genuine price cuts.
So, the other 90% of ‘bargains’ are effectively cons. Consumers being lured into buying things under false pretenses. Anecdotal evidence from a couple of retailers (who shall remain nameless) suggest that all they do for Black Friday these days is put up a few gaudy posters in the shop window and also by a rack of items that were on promotion in any case. A practice that is probably widespread across the market. But trying to dupe your customer base is a dangerous game for any retailer to play.
Three of the very most important things for any retailer, in any sector, in any country in the world – gross margin, brand value and customer trust. All three are at severe risk of compromise through Black Friday.
Above all else, there is no evidence to suggest that Black Friday drives incremental retail sales growth. All it does is disrupt demand patterns and redistribute spend over a very unpredictable timeframe.
All in all, a lot of noise and fuss about nothing.
What’s good about Black Friday?
Nothing whatsoever.
What’s the alternative?
Doing nothing. Too many operators are too far gone to row back and many lack the courage and faith in their brand to do so.
But there are exceptions to this. To single out just three: M&S, Next and Primark will not embrace Black Friday this year and have only flirted with it very lightly in the past. All three are razor focused on full-price sales, recognized the importance of gross margin stability and back their product and brand to withstand noise in the wider market.
M&S, Next and Primark will also be amongst the top performing retailers over Christmas and this will become clear as the festive trading statement are released in the New Year. No coincidence that they stood firm in eschewing the folly that is Black Friday.
What’s new this year?
Not a tremendous amount, essentially more of the same – with the volume cranked up to a Spinal Tap-esque 11.
But two key differentiating factors do stand out this year, one seasonal, one structural. Firstly, Black Friday is late this year, its now-forgotten precursor of US Thanksgiving being on 28 November, the latest day it can ever fall. This is significant in that Black Friday itself will probably fall outside the November reporting period for the ONS retail sales figures when they are published on 20 December and will instead be captured in the December figures. Hope springs eternal that this will prompt the ONS to produce figures that are more reflective of actual Christmas trading patterns, rather than mercilessly downplay December as they have in the past.
Secondly, there is huge contradiction – and much hypocrisy - between the retail sector’s response to the recent Autumn Budget and their embrace of all that is wrong with Black Friday. The juxtaposition of Rachel Reeve’s Budget and Black Friday may seem a curious one to make. As covered in a previous Retail Note, retailers are now faced with a triple whammy of additional costs (increased employer NI contributions, rising minimum wage, revised business rate multipliers) that will weigh heavily on their bottom lines. But any sympathy on this is sorely tested if they willfully inflict the same bottom line pressure on themselves through Black Friday participation. Retailers pleading poverty, but doing nothing to enrich themselves.
Not that anyone will be reading this anyway – everyone is no doubt currently out shopping, being conned or hurting retailers’ gross margins. Enjoy!