Black Friday: Good or bad?

adgild hopCapgemini’s head of retail consulting, Adgild Hop with retail consultant, Emily O’Neill explore the impact of introducing Black Friday to the UK retail market.

Black Friday 2013 saw Asda selling 10,000 TVs in one hour and John Lewis’ website sold more than double of any previous single day’s trading. And that’s just two examples…if Black Friday is that great, then surely all we need is more hyped-up single days of discounted sales and the retail sector would be saved!?

Four years ago, Amazon introduced the UK to Black Friday, with Asda bringing it to stores in 2013. We haven’t yet seen the same levels of “bargain passion” from UK shoppers as in the US (in the last five years there have been over 300 in-store injuries recorded, some very serious, during what some in the US are now calling “brawl-mart”). But is it just a matter of time?

So what’s it all about? Beyond the hype and the hysteria, is Black Friday actually a good idea? Will deep early discounts in November really drive incremental sales, profit and loyalty? Before you jump on the Black Friday bandwagon, are you sure you’ve thought it through?

Is it an incremental sale or just an earlier sale?

In the US, Black Friday is a Bank Holiday. It’s a day when sales peak naturally. Retailers started discounting to magnify the already present post-family-dinner shopping urges intrinsically embedded in some of us. In the UK, Black Friday doesn’t mean that much – we haven’t been celebrating Thanksgiving, we’re not enjoying a day off and deciding what to fill the time with, and we aren’t feeling giddy that the start of Christmas is upon us. But as consumers, we’re just as enthusiastic for an easy bargain.

In creating this demand, the big question is whether retailers are simply pulling forward sales that would otherwise have occurred closer to Christmas, and possibly at full price. Sales figures from 2013 suggest that the answer may be yes, with John Lewis’ sales falling 1.7% the week after Black Friday despite gearing up for Christmas, and Asda, who claimed Black Friday was a huge success, saw sluggish sales growth of 1.3% over Christmas, a far cry from being a seasonal winner. Inconclusive at best.

What is it worth, selling it earlier?

Due to it not being linked to a Bank Holiday in the UK, Black Friday is predominantly an online phenomenon and it’s likely to stay that way. For online-only retailers like Amazon this isn’t an issue per se, but for multichannel retailers, the risk is that you don’t just move a sale forward but you move it to a potentially less profitable channel.

Arguably, an even bigger concern is that the only reason you’re making the transaction on Black Friday is because you’re discounting…more often than not the consumer may well have paid full price (and with a full-fat margin) a few weeks later.

Does it make your customer happy?

Of course it does in the short-term; it gives them a bargain they did not expect. But frenzied price changes can condition customers to think the ticket price is not real and in the long-term retailers will risk damaging customers’ relationships with their brand. Plus in the States it’s led to cases of what can only be described as ugly human behaviour, as shoppers literally climb over each other for a bargain. It’s also leading to people being encouraged to shop and to work on Thanksgiving evening, when, one might argue, they could be with their families being thankful. All of this for the sole purpose of safeguarding a (lower margin) transaction earlier in the year!

All the more reason to really sense-check; why would you? Assuming you have your proposition right and your customer relationship is strong enough, our advice would be: really think it through and be patient. The alternative is yet another period of discounting when, being so close to Christmas, customers are getting prepared to emotively splash out on nice full-price, full-margin purchases. It really doesn’t bear thinking about, does it?