Is it obligatory for retailers to participate in Black Friday?

By Will Gillingham – IMRG

When Black Friday became melded into the public consciousness in the UK in 2014 (it had been around for years before that, but 2014 was the year it exploded), many retailers experienced an upturn. Even some of those who didn’t participate in discounting saw a sharp spike in their sales owing to the general purchasing frenzy which seized the nation.

In 2017, however, this ‘halo effect’ had gone. While discounting retailers saw an average sales uplift of 11.7%, non-participants saw only a 3.7% uplift (in spite of a far bigger spike in site visitors).

In the competitive marketplace of UK retail, this rather sizeable gap (representing a potential divide of many thousands, even millions of pounds) could seem like it’s well worth getting involved in discounting for any retailer looking to get ahead. It could even seem like a boost which retailers can’t afford to do without, lest their competitors gain the upper hand.

But is that truly the case? Is it obligatory for retailers to participate in Black Friday, and dedicate a massive amount of resource to the month of discounting? Or is it an optional event, replete with as many drawbacks as it has benefits? We approached our community of experts for their insight on the matter.

Not as Simple as Black (or White)

The hesitant answer is: yes, Black Friday is obligatory. With a catch. And that catch can take a multitude of forms: the type of retailer contemplating participation, whether the delivery strategy is ready for the bottleneck, and the ultimate goal of the retailer. Each of these points will be delved into in further detail below.

But for the most part, it’s a sales period which retailers can’t ignore. As Adam Foster, Social Media and Content Marketing Manager at ShipStation, states, the answer is: ‘yes, no, and maybe. Retailers don’t have to participate in Black Friday, but if they don’t participate, they may be missing out on some enthusiastic Christmas shoppers.’

Foster continues: ‘Black Friday sales are expected to rise once again this year, so refusing to participate might not actually be an option. At least if you’re all about immediate ROI.’

Data provided by Tim Robinson, CEO of Doddle, supports Foster’s view: ‘YouGov research we commissioned in October shows that Black Friday is as inbuilt into the UK psyche as Bank Holidays, with 98% of the population now aware of the phenomenon and 7.5 million planning to change their behaviour around the day, either by staying up late or setting their alarm to get up earlier than usual. Any buying event with enough pull to change behaviours is too powerful to ignore in any climate, let alone in a climate as tough as the current one.’

But both Foster and Robinson concede participation should be influenced by the goal set by the retailer. As Foster mentions, Black Friday is a shortcut to immediate return on investment, but it has no real sway on the other 11 months in the calendar (although smart retailers will look at how new customers acquired could be put into marketing segments to convert them into more regular, profitable customers over the longer term). And Robinson argues those other 11 months can be as, if not more, valuable to invest in.

Robinson: ‘[Black Friday] is essentially no different to any customer acquisition or loyalty driver: a ‘try before you buy’ service, a subscription-based member delivery proposition or a delayed payment scheme. And once you see it that way the question and answer for any retailer becomes far easier. It’s no longer a debate about whether to jump on a once a year band-wagon. It’s a question of where Black Friday fits in your overall business strategy and whether it, or another sales device, is going to have more power in attracting and more importantly keeping the customers you want.’

A tale of two goals, then: an immediate boost to sales, or longer-term customer retention. Both have their share of attractive prospects.

The Argument For Black Friday

Figures surrounding Black Friday are compelling, and the level of customer engagement is irrefutable. Data provided by Katie Woodhead, Head of Experience Optimization at ATTRAQT, demonstrates just how popular the event has become.

Woodhead: ‘2017 [was] the most prolific year yet in terms of the number of customer queries and requests that we managed for our retail partners. For 2017, in Europe alone, we handled 5221 queries per second, 323,214 requests per minute and 300 million requests in total, which was a record for us.’

Matthew Foo, Assistant Marketing Manager, AsiaPay, cites the huge participation in China’s standout sales event, Singles’ Day, as a prime case in favour of widespread discounting: ‘we encourage retailers to take part in such promotions. The achievement of the recent Singles’ Day event where a total of USD$30.8bn worth of sales was achieved within 24hrs (or a nearly 27% year-on-year rise) shows the potential for retailers.’

And previous events don’t take into account the potential novelty of this year’s peak period: a wage-earning, social-media savvy Generation Z. Padraig Slattery, VP Retail at SafeCharge: ‘Black Friday is playing such an integral role in the holiday season that customers expect it to be part of their yearly festive experience. Rather than driving all efforts to their home site, retailers must realise that they can maximise their sales conversions on other channels too, particularly on apps that are already an integral part of their consumers’ daily lives, which in itself increases their propensity to buy.’

What these indicators point towards is an almost definite sales uplift – though margin is perhaps another question – on Black Friday for any participating retailer. But it goes beyond this. Florent Maillard, Senior Manager Insight & Analytics, Criteo: ‘Client level analysis suggests that those who participated in Black Friday in 2017 increased their market shares not just for the event itself but for the following weeks. Many retailers who did not generate a surge of transactions in Q4 2017, also lagged behind in Q4 overall, compared to their competitors.’

Quite simply, not participating in Black Friday means missing a colossal chunk of shoppers: both bargain hunters and those buying for Christmas.

There are few cases in which retailers shouldn’t get involved with Black Friday, but those cases are palpable.

The Argument Against Black Friday

In frank terms, the colossal discounting of Black Friday can create a shortfall for retailers, rather than a profit. Unless the strategy and deals have been intricately worked out to ensure a profit, then on paper the event can be less lucrative than retailers might hope.

Gavin Masters, Industry Principal eCommerce, Maginus: ‘Consumers are very brand-blind during Black Friday and will often buy from businesses they have never bought from before, or would likely ever buy from again. If the deal is there, they will take it, and if you’re not in a position to compete on those deals, it makes little sense to jeopardise the profitability of your retail business by slashing prices if there is no commercial need to do so.’

Gary Winter, Parcels Director at PayPoint, agrees: ‘There is huge pressure to take part, even if it makes no sense from a business perspective.’ He argues Black Friday shouldn’t be an attempt at a massive sales volume, but rather one of increasing the returning-customer base: ‘it is important that retailers use Black Friday to deliver a more long-term business advantage rather than just a quick one day hit.’

This is what retailers need to investigate: whether a returning customer is more profitable than an uplift in sales on Black Friday. If the latter, then perhaps Black Friday is obligatory. But if the former, there is a case to boycott the event altogether (for new customers, at least).

Recent research from Ingenico gives particular emphasis to the case against Black Friday, showing that doubt has begun to creep into the minds of UK customers. Benoit Boudier, Managing Director, EMEA, Small and Medium Businesses at Ingenico: ‘Less than half of the UK’s 2,000 respondents (45%) cited discounts as the feature they desire most during the Black Friday online sales. Driving this surprising response is growing widespread scepticism from almost two thirds of respondents that the discounts are artificial (65%). Over a quarter (27%) of us would reportedly prefer other incentives such as unique products, loyalty and referral bonuses, an extended returns/ exchange window period or free next-day shipping.‘

Stephen Deverson, Sales Director at GFS, believes customer retention takes precedence over sales: ‘With 64 percent of shoppers acquired during Black Friday having a lower lifetime value than shoppers acquired at any other time of the year, there’s an argument to say that, if anything, Black Friday is decreasing in importance. For retailers, Black Friday means selling key products at reduced margin, which is compounded by the fact that these customers are rarely repeat customers; diminishing the value of the day for brands.’

Data from Mention Me further solidifies the need to create a loyal customer rather than sales on Black Friday. Andy Cockburn, CEO, Mention Me: ‘Over half (53%) of the 2,000 consumers questioned [in our survey] didn’t shop on Black Friday at all. And of those that did, almost a fifth (16%), based their purchase choices just on the brands with the biggest discounts on the day. This suggests that of those who do shop on Black Friday, loyalty and repeat purchasing is likely not front of mind.’

Either way, a campaign needs to be in place. Whether it be to benefit immediately from the Black Friday surge, or to use the influx of traffic to capture repeat customers, Black Friday can be a springboard event, so long as a long-term strategy is in place. In this way, the gravitational pull of Black Friday can benefit both participants and abstainers, and perhaps, in this way, Black Friday is obligatory.

Except for when it’s not.

The Exceptions to Participation

There are three particular ways, as pointed towards by our respondents, in which participation in Black Friday isn’t necessary or advisable:

Luxury

Luxury retailers operate outside the general UK customer base. Their premium prices appeal to a specific buyer, and even considerable discounting would leave the items at a price point far above what the average customer spends. Owing to this, Black Friday participation should be strictly optional.

Stefan de Jong, Retail Strategist, KEGA: ‘Companies operating in a market which is mainly price driven or which has many competitors probably have no choice. But I do not see why specialty stores or retailers selling luxury or premium items should join. Participating might lead to short-term high revenues but in the long-term it might do damage to the brand or lead to lower margins.’

Delivery

It’s all well and good to establish an irresistible sales campaign, but if a retailer’s delivery connections don’t reflect the massive purchases made during the event, it could be a damaging experience.

Maria Morais, Industry Principal, Consumer Industries, SAP Customer Experience: ‘If the company is not ready to respond to the high demand of the coming weeks and the business supply networks are not prepared with clear, data driven allocation and replenishment plans then it’s best to not participate in events like Black Friday to avoid the risk of disappointing customers and have to manage severe consequences during the rest of the year due to lack of trust in the brand.’

Global

As seen with the Netherlands, Black Friday is not all-encompassing. Outside of the US and the UK, the penetration of Black Friday can be lacking. In Australia, for example, customers are still more used to Boxing Day sales than Black Friday, as mentioned by Localz. In this way, Black Friday is only unavoidable for those retailers existing in either the US or the UK.

Louise Robertson, Marketing Director, Localz: ‘Black Friday hasn’t quite yet reached the level of notoriety that it has in the US. This year they are extending trading hours, but it hasn’t gained the full velocity seen at the start of the Christmas shopping season.’

In Summary

Participation in Black Friday discounting is dependent upon the goals of the individual retailer. For those who have a strategy in place to profit, not getting involved could cause them to miss a substantial frenzy of shopping. However, for those retailers who have an ultimate goal of existing customer retention, applying heavy discounts to attract new customers could potentially be contrary to that ambition.

Early signs are that Black Friday certainly isn’t going anywhere quickly – the number of Black Friday campaigns that were live on Monday this week are testament to that. The question of whether to participate will be just as relevant in 2019.