UK Black Friday sales reached £1.23 billion in 2016, a 12.2% increase on the £1.1 billion spent on the same day in 2015. Despite this success, however, the Black Friday Weekend harbours a plethora of challenges for retailers to tackle, from traffic spikes to high return costs.
So we pose the question – is Black Friday a curse or a blessing for retailers?
The difficulty of managing increased traffic levels
During the Black Friday Weekend, the majority of consumers chose to buy online, rather than face the potential chaos of in-store shopping. As a result, traffic levels are at an all-time high, a clear positive for digital retailers.
However, this increased traffic can be a curse in disguise. In recent years, as examples, the Tesco site took 8.4 seconds to load, whilst Argos’ site suffered a page load time of 10 seconds as its web servers struggled to cope with huge traffic spikes.
This can greatly damage brand image, and worse still, lose huge volumes of sales. Think of Black Friday 2015, when John Lewis’ site crashed. Expecting to sell £45 million worth of goods over the day, IT firm Capacitas estimated that the outage could have lost John Lewis up to £2.8 million in lost sales.
These high-profile news stories highlight the importance of preparing for such traffic spikes during Black Friday. Retailers should therefore consider hiring or renting more storage capacity near urban hubs to prevent their sites being brought down.
Christmas sales being brought forward by Black Friday
Black Friday unarguably increases sales. However, many are questioning whether these sales actually help to boost incremental sales over the year, or whether they simply bring forward the Christmas sales.
In December 2015, the Office of National Statistics reported that annual UK retail sales fell by 0.7% compared to a year earlier – the first annual fall since May 2009. Although the ONS accounted this drop partly on mild weather that reduced demand for winter clothing, it also blamed earlier discounting, including the Black Friday Weekend.
John Roberts, the founder and chief executive of AO.com, supported this argument, claiming that the eCommerce day “did not produce incremental sales, but condensed sales into a shorter time period".
"did not produce incremental sales, but condensed sales into a shorter time period" Having said this however, AO.com are preparing for Black Friday alongside the majority of large retailers.
In 2015, ASDA chose not to get involved in Black Friday; instead offering a broader Christmas sale. The result? They suffered their worst quarterly sales ever with like-for-like sales in the 13 weeks prior to January 1st 2016 down by 5.8%. Although ASDA accounted only 0.4% of this drop in not taking part in Black Friday, this is still a huge loss for a company with quarterly revenues in the billions.
A retailer could choose not to take part in Black Friday 2017, instead waiting to release deals closer to Christmas. However, by doing so it could lose huge volumes of sales to the customers who wish to purchase earlier during the Black Friday Weekend. Black Friday may therefore have become a sales event that retailers just can’t afford to ignore.
The cost of returns cutting into profit margins
The urgency of the weekend undoubtedly helps boost sales as customers rush to grab a bargain. However, in this hurry, many customers purchase items that they later decide they do not need or want – and so return them.
This can cause huge problems for retailers as returned products can be tied up in the return process, and so are unavailable to buy, for weeks. According to Clear Returns, £600 million worth of products bought over Black Friday and Cyber Monday 2015 in the UK were trapped in this process until the middle of December.
Returns can also severely cut into retailers’ profit margins. An estimated £130 million was spent by retailers on returning unwanted goods in 2015. However, these costs can be greatly alleviated by improving product images, using product reviews and perfecting a smooth and efficient customer service.
A poll by LCP Consulting surveying retailers on their opinions of Black Friday found that 31% agreed or agreed strongly that “Black Friday is an unprofitable and unsustainable promotion”.
"Black Friday is an unprofitable and unsustainable promotion"On the other hand, 38% disagreed with this. Such clear divide in opinion shows how the success of Black Friday can differ so greatly for businesses; varying by sector, size and perhaps most importantly, how well the retailer prepares for it.
So, is Black Friday a curse rather than a blessing for retailers? The three points above lean towards curse, but there are notable exceptions to the rule. It's up to you whether you choose to get involved in the eCommerce event or not, but the question you must ask is this: can you afford not to?
We crunched the numbers and analysed the data to uncover what really happened during 2017's Golden Quarter. Download our Golden Quarter report for exclusive insights into the latest online shopping trends.