A couple of years ago, everyone agreed that Black Friday was a bad idea; why would retailers want to be forced to give away margin before Christmas, as well as screw up their supply chain?
Fast forward to 2015 and the story is very different. Preparations are well underway for what the UK expects to be its largest Black Friday event every next month – topping the estimated £810 million spent in 2014. We’ve moved towards the USA’s seasonal model, where Black Friday very much kicks off the festive shopping season.
With characteristic resilience, most UK retailers have readjusted remarkably quickly and found ways to add yet another promotional event to their calendar; and that’s even without mentioning Halloween, which is starting to look a lot like Easter in terms of size and opportunity.
Some retailers have fully embraced the big event, to the extent of allocating stock specifically for it. This means they already know that their sales will be profitable, because the discount is built in from scratch; as distinct from those retailers who panic and try to rearrange the deckchairs on the Titanic before the whole thing sinks.
My concern is, there are parts of the typical retailer’s business that are not yet coping with changes in the promotional landscape. An obvious concern is the supply chain, which is being forced to deal in uncertainty, an area in which is not perform well, given that so many ducks have to be in a row for it to perform efficiently.
Turning stores into fulfilment hubs is one answer, but many retailers have no visibility of stock across their business, let alone the systems to manage it dynamically against in-store and online orders.
The logistics network is also challenged to respond to Black Friday – just look at what happened last year as an example. An early shopping spike caused a bottleneck that impacted deliveries throughout the Christmas trading period, with retailers including Amazon, Currys PC World, Debenhams and River Island struggling to clear the order backlog. Some even cancelled same day and next day deliver options in a bid to catch up.
Yet all of us know of at least one major retailer that will not be coping, again, this Christmas in getting orders delivered in time.
Add to this the problem of returns; deliveries made for Black Friday will trickle back to the retailer between late November and early January, at exactly the time when retailers are maxed out for Christmas. This means that stock will be stuck in a warehouse during peak demand times, before being piled back into the store in peak sales period, with retailers losing vital margin in the process.
Far from being scare stories, though, these challenges should be seen as points for improvement, to maximise what is rapidly becoming a lucrative opportunity for UK retailers.
Technology in theory has all the answers to ensure a profitable promotion, but my concern is that the changes needed are more fundamental than that.
People and processes will both have to evolve, and that takes time, even for the most fleet of foot retailer. Perhaps the real measure of success will be Black Friday 2017.
By Chris Field, chairman of Retail Connections.
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