With Black Friday almost upon us it’s worth taking stock of where we are, why it is such bad news for retailers and what they are trying to do about it. What is it and why is it here? In the US, the day after Thanksgiving is a holiday. It is traditionally the day that people start buying their Christmas presents and it is also, supposedly, the day that retailers move from being loss making to being profitable for the year. (Moving into the Black, hence Black Friday). Traditionally therefore, retailers have always promoted on that day to persuade customers into their stores. But it has got out of hand. The promotions have got bigger and bigger and scenes of chaos in-store are just part of the event. So three years ago, US retailers – Amazon and Asda (owned by Wal-Mart) thought it would be a good idea to bring the concept across to Europe. Asda says that the first year was a huge success. Less resonance on this side of the Atlantic But over here, that last Friday in November is just a normal working day. There is no point in making it a big promotional day because consumers wouldn’t be going shopping. So the demand on Black Friday last year was focussed on the “bargains”. And in practice? So what actually happened last year was that people bought the bargains and little else. In the consumer research for Christmas shopping habits UK 2015, we found that 11% said they had bought gifts on Black Friday and 7% had bought on Cyber Monday (notionally the first Monday after the payday in November and a very big online day). So Black Friday took spending out of people’s pockets that would otherwise have gone into full margin gift purchases in December. In the event promotions were heavily focused on electricals and there the hangover in that sector lasted well into February. It was a heavy day for online sales and many retailers struggled to cope (and some failed). After the event the police made it clear that it should not have had to be their job to sort out the chaotic scenes caused by the promotional activity. How big was it? We estimated that the extra spending due to the promotional activity in November was around £400m last year. There are other figures being canvassed, but we think that this estimate is the most meaningful – it is a measure of how much spending was brought forward. The message that came clearly from the retailers after Black Friday last year was: 1. It was a big success in sales, but not in profits 2. The strategy for the future would be one of damage limitation We only found out within the last month that Asda decided then not to take part at all, but it told no-one until November. This was a surprising decision because Asda will still potentially lose out because of the spending diverted by Black Friday into other people’s “bargains” although it will be spreading its offers over the December period. Black Friday 2015 Already in 2015 we can see retailers trying to make Black Friday into a more sensible promotional effort which might boost their businesses. The main strategy has been to try to spread the promotions over a longer period and so achieve what the promotions should have been for – to attract people into the stores for full margin gift sales. So we have seen Argos plan multi-coloured promotional days and Currys’ promotions are already available on a “when it’s gone it’s gone” basis. After all, the promotions tend to be special purchase merchandise and not necessarily discounts on core merchandise. But we can also see that people are holding back on purchases because they know Black Friday is coming. “So a more insidious effect of Black Friday is that it is undermining the pricing integrity of the whole sector.” Christmas 2016 Asda’s decision to stand aside has given everyone else permission to do so as well. Asda’s competitors will no longer feel under pressure to promote on that day and in that way. We think that we will see a return to more sensible promotional activity next year. Cyber Monday will still be important online and we think that major retailers will cut back on the special purchase merchandise and concentrate more on full price and full margin sales. It would be nice to think that Black Friday will disappear from our vocabulary, but that is unlikely. But we do think that it will morph into promotions designed to support retailers rather than undermine them. Richard Perks is Director of Retail Research at Mintel where he advises clients, writes retail reports and presents webinars. Richard joined Mintel in 1999 and previously headed the Retail team, overseeing the content and strategy of the retail reports. He regularly provides analysis to the global media on retail issues. Before joining Mintel, Richard worked as a City analyst and as a journalist. You might also be interested in: No related posts.