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Black Friday not delivering the goods

27 Nov 2015

Why some retailers are abandoning one of the biggest annual sales events

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An annual sales extravaganza that whips deal-hungry shoppers into a frenzy is no longer delivering the goods for some retailers. After celebrating Thanksgiving with their families a day earlier, US citizens will storm stores today to battle for the best Black Friday bargains. 

The US tradition that sees people fighting for cut-price TVs has emerged in the UK in recent years. But some British stores have opted out, after suffering poor seasonal sales in the run up to Christmas. 

Having introduced the event to UK high streets in 2013, supermarket ASDA says it will not be taking part this year due to “shopper fatigue”. The Walmart-owned chain was criticised by police in 2014 for its handling of the event when shoppers fought over deals in its stores.  

Other British retailers to drop out or scale back their plans for Black Friday include John Lewis, Mothercare, Argos, Primark and Oasis. The reasons given range from wanting to spread out their sales in the weeks before Christmas to reducing the stress placed on staff who would face a barrage of customers.  

Poor sales following a bumper pay day has also been cited as a reason. British retailers made £800 million in 2014 from shoppers who spent £1 million every three minutes throughout the day. The number of customers visiting stores increased by 23%, but the unexpected fallout after the event hit businesses hard. That December, sales growth reached 1% – the lowest since 2008. Meanwhile, online sales of 5% was the lowest ever growth for retailers during Black Friday.

Think long and hard
While some British retailers suffered a Christmas period sales slump in 2014, they should think twice before abandoning Black Friday. Oded Koenigsberg, Term Associate Professor of Marketing at London Business School, believes companies need to consider the pros and cons – especially if their competitors are still taking part. “It’s risky for retailers not to be involved when their rivals are participating in Black Friday,” he said. 

Dr Koenigsberg added that American retailers thinking of scaling back their plans for this or future Black Fridays should adopt a similar strategy. Research by LCP Consulting shows that a third of British and US retailers say the sales bonanza is an “unprofitable and unsustainable promotion”, while the same number believe it benefits their business. 

The business consultancy’s annual study also found that retailers with established outlets and a significant online presence were better placed to capitalise on Black Friday sales and react to peak trading throughout the day. In contrast, businesses lacking the infrastructure to cope with the surge in demand risked alienating customers, which could affect their long-term sales. 

Businesses that choose to hold Black Friday sales must offer something more than knockdown prices, according to Dr Koenigsberg. “Emphasising a price reduction over the Christmas period is a dangerous thing – consumers get used to and expect it,” he said. “That then puts pressure on the retailers to keep cutting their prices each year and reduce them more frequently beyond Black Friday.
 
“Companies feel forced into cutting their prices when their competitors are doing so. They think making reductions is the only way to entice customers, but I would challenge that. They could offer other services or propositions, such as a selection of products for a competitive price rather than drastically slashing the cost of consumer goods, for example.”

The origins of the name Black Friday are debatable. One theory is that it relates to the price reductions in stores, while others believe the name refers to the day when retailers turn a profit for the year and move into the black. 

“We now have this sales event, which has become a big deal – especially in the US where society is becoming increasingly consumer-led,” said Dr Koenigsberg. “Competition among retailers has really ramped up, which creates a dilemma for ones that have opted out or considered doing so.”