The bedlam of Black Friday 2016: Predictions, preparations and what to expect

With only a matter of weeks to go until Black Friday – or as some predict a Black Five day week – retailers need to prepare for the shopping extravaganza.

So, what is Black Friday & why should you care? Black Friday has been a big deal in America for decades. But five years ago, the shopping event didn’t even exist in the UK. It only really took off in the UK in 2013 (largely in response to the likes of Amazon, and, Walmart-owned, ASDA championing it).

The Black Friday deals period is now bigger than Christmas. It’s the day, weekend and increasingly week when retailers (specifically electronic retailers) slash the prices of pretty much everything.

It takes place the day after Thanksgiving – this year on Friday, November 25. Black Friday signifies a shopping frenzy. Almost all retailers offer huge discounts to attract hordes of shoppers. And customers love it - people queue for hours before a store is opened (or online), to grab the bargain of the year.

Though Black Friday is traditionally a high street event – characterised by store discounts so big that they cause shopper fisticuffs that end up on YouTube – these days it’s increasingly online as well.

On Black Friday 2015, UK online sales grew by 36% year on year to £1.1bn. And BT Expedite reports that UK retailers received 16.5% more online orders over the Black Friday period in 2015 than they did in the same period in 2014, with revenues also up by 19%.

It’s safe to say that Black Friday has rapidly become the biggest shopping day in the UK - with approximately £2bn spent in shops and online in just 24 hours last year.

Indeed, Amazon said that at 9.10pm, Black Friday 2015 became its biggest sales day ever in the UK with over seven million items ordered (that 86 items per second).

Across the last two Black Fridays, sales records were smashed, websites crashed and shoppers snapped-up deals. The last two Black Fridays have been the two biggest days in retail history – that’s how big it is!

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How is Cyber Monday connected? So, Amazon was a big winner last year. Why? Amazon created a fortnight of deals, by spreading discounts far beyond Black Friday. This was much longer than other retailers that simply spread deals over weekend – culminating in so called Cyber Monday.

Cyber Monday is the Monday immediately after Black Friday (this year falling on November 28). It started as an attempt to create an online equivalent of Black Friday’s high street extravaganza. Most retailers offer deals from Black Friday through the weekend, but many announce exclusive internet-only deals on Cyber Monday. This results in a 4-day weekend of bargain deals both in store and online. Cyber Monday became a key retail trend here in the UK in 2015 (and likewise, the extension of deals over a longer time frame, like Amazon, is set to be a key retail trend this year). Of course, with Black Friday and Cyber Monday cramming an entire weekend between them, it’s expected shoppers will spend as much as £2.2bn this year on tech, clothes, shoes, white goods and everything else (that’s 15.9% more than 2015).

Retailers must prepare for Black Friday 2016. Christmas starts properly on November 1st, says Karen Harris, Managing Director, Intu Digital – the UK’s largest shopping centre owner: “We don’t isolate Black Friday, we plan for the full Christmas Period and beyond, starting November 1st, building in Black Friday, Christmas and the January sales - it’s a whole period of activity.”

With help from Karen Harris, here we’ve pulled together five key pieces of advice to capitalise on the sales potential of the shopping phenomenon that is Black Friday...

1. Rigorous tests:Black Friday is exceptionally busy, so retailers must test their core systems to identify any potential breaking points, says Karen. This will help retailers to understand how to cope with a “break down” scenario if faced with an overwhelming influx of traffic on the day (or surrounding weekend)

2. Drip-feed marketing: Peak traffic on Black Friday is predictable. But the surrounding days are also crucial. Retailers will benefit from drip-feeding customer deals to keep them shopping across the peak right through to Cyber Monday. And, of course, customers expect you to engage with them on their channel of choice, be it via email, mobile or social media. A gradual, multichannel approach will meet expectations and reduce strain on infrastructure and fulfilment teams

3. Prepare the entire business: The entire business (people, processes and technology) needs to be aligned in the build-up to, and on Black Friday. Consistent and reliable communication between technical operations and sales/marketing teams is an absolute must. Now is the time to make sure that everyone is fully aware of the plan for peak trading – not just in silo, but across the entire business. Specifically, everyone must be aware of marketing campaigns and sales promotions (deals) in advance so that all teams can prepare for the influx of traffic

4. Make a plan B: It is very difficult to make Black Friday 100% fail-proof. But it’s not too late to put some basic safety nets in place. For example, build-in an online queuing system – where customers are placed in a line to access the website – to help control the sudden surge and reduce the chances of crashing.

Last year some of the UK’s biggest shopping websites struggled to cope with the volume of online orders, with John Lewis, Argos, Boots, Tesco and Game all crashing or suffering slow loading pages. Similarly, think carefully about your social media strategy. Long gone are the days where you can just ignore a complaint. Customers expect you to monitor complaints constantly and respond immediately. If something goes wrong on Black Friday, it’s best to have a plan in place, or suffer the inevitable grilling on social media.

Equally, if a customer says something positive, a well thought-out social media response is a great way to show your customers that they really matter, and other potential customers that your brand has a personality. In sum, it’s smart to identify the risks that may arise on Black Friday and create a cheat sheet of solutions. This ensures that appropriate and timely action can be taken by the relevant team (...whether it’s IT ecommerce, marketing, social media or PR).

5. Don’t forget your front line: Make sure that staffing plans are set. These should include everyone involved in peak operations (i.e. vendors and suppliers as well). A clearly communicated plan will ensure that everyone is aware of their role and responsibility across the weekend

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Beyond the Black Friday madness, setting-up processes and team structures to put customers first is becoming a fundamental shift across many retailers.

Hollie Napier, Central Operations, Sainsbury’s | Argos says: “It is the most important thing in my mind for delivering that WOW experience and gaining customer loyalty. We are extremely focused on simplifying tasks/communications for colleagues to free up there time so they can spend more time with their customers. We also have a customer fist programme encouraging office based colleagues to spend more time in stores supporting at key times of the year.”

Hollie adds that collaboration is the key. “You need to have a collaborative working environment where it is encouraged to work together and not against each other which is what having conflicting KPIs can drive silo working. Having frontline experience with your customers is incredibly valuable and that’s where you will get the majority of your answers to business challenges.”

Jonathan Newton, Head of ecommerce, Wilko, agrees, stressing the importance of fully understanding digital customer expectations, and then reflecting those in organisation design. Two key questions retailers need to consider include: How should digital teams be structured... as a standalone function, fully integrated or partially integrated? And how do internal resourcing teams keep up to date with moving trends in digital recruitment needs, roles and expectations?

To find out how retailers and brands are embracing digital transformation to thrive in today’s competitive environment visit – https://aka.ms/blackfridayretail

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Is Black Friday bad for business? Black Friday is brilliant for customers. With Christmas just around the corner, prices drop at the perfect time. It’s an opportunity to buy that laptop you’ve wanted all year (and your Dad’s Christmas present on-the-cheap). But for retailers it’s much more problematic.

It’s safe to say that retailers hate Black Friday. It forces them to discount products, and therefore trim their already slim margins, at a time when customers are more than likely to spend money for Christmas anyway. Not to mention forcing a drastic rethink of stock levels, logistics and staffing – all at a time when retailers would much rather prepare for Christmas.

So… Is it really wise to drop prices at the start of the busiest shopping period of the year? Has the event distorted Christmas spending, pulling it forward at a time when retailers traditionally charged full prices?

Many retailers, and retail analysts, suggest that Black Friday isn’t wise at all.

A big chunk of the shopping hordes will only be going to the stores to get the bargains. They won’t be spending on anything else, or be back when the sale is over. This is not ideal if you are looking to build customer loyalty (and repeat business). Across Black Friday 2014, marketing experts, Verdict Retail, showed there was no evidence that the event stimulated demand. In fact, by discounting products, retailers only sold stuff they would have sold anyway but for less money. In this light, retailers have to ask: Is it right to concentrate so much trade in one deal period?

Last year, Asda named “customer fatigue” as one of the reasons they held back from Black Friday, saying customers would prefer better offers over a longer period. It’s an interesting point. If you are a loyal Asda customer all year round, you would likely ask yourself: Why must I face the crowds on Friday, why can’t I get the same price on Thursday?

Black Friday doesn’t always show high street shopping in its best colours. We can all picture the news images of customers charging into stores, fisticuffs to grab a bargain and the police separating fights for the last iPhone. If you invest a pretty penny in Christmas marketing, the last thing retailers want is to be seen as the place where fights break out. So again, like customer fatigue, you run the risk of putting-off existing customers, and not attracting new ones.

Indeed, research by shopping analysts Springboard and Footfall highlights a drop in high street shopper numbers of 4.5% and 4.0% respectively in 2015. Some shoppers may have stayed at home because the bargains weren’t exciting enough, while others may have been put off by the possibility of getting punched.

Another big danger is the returns process. Last year £600mln worth of stock bought on Black Friday was caught up in the returns process and not back on shelves in time to be sold before Christmas. These items could have been sold at full cost after Black Friday so the opportunity cost for retailers can be huge.

Hollie Napier says: “Pressure on systems on Black Friday is always a concern but we have taken lots of learnings from previous years to improve the service we plan to give this year.”

Finally, some analysts say Black Friday has simply distorted Christmas spending – pulling it forward at a time when retailers traditionally charged full prices. December has gone from being one of the best months, to being one of the hardest. Indeed, last year UK spending in December dropped for the first time in six years (This is Money.co.uk), the assumption being that everyone spent all their money in November when everything was cheaper.

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It’s a tricky time for retailers as discounting can be negative in terms of economic strategy and brand equity, says Karen Harris.

“Black Friday is particularly tricky as there is a customer expectation - as it’s a gifting period by the retailer to their customer with very special deals. Retailers often discount on items, no available at other times of the year, it’s something the retailer has really, really thought about to go the extra mile for the customer around Christmas. So in that way it can really help retailers’ relationships with customers, but at the same time you are still discounting - so whether or not that customer would have bought something at full price we don’t know.”

All in all, this sparks one of the most interesting questions about Black Friday: Has it created new demand or just brought forward people’s Christmas shopping by a few weeks?

So what’s the cost of missing out? ASDA may have brought Black Friday to the UK, but, as touched upon previously, it decided not to take part in 2015. Instead, it offered more sustained discounts across the Christmas shopping period.

The result? Like for like sales in the 13 weeks from Black Friday to January 1 were down 5.8% (Asda’s worst quarterly sales ever.) ASDA reported that 0.4% was due to not taking part in Black Friday. Although 0.4% doesn’t sound like a lot, with your quarterly revenues measured in billions, it signifies a vast amount of money.

That said, even retailers that do take part, can find themselves losing money as websites crash under the volume of demand. If customers can’t access your website they can’t buy anything. Last year, John Lewis reported that on Black Friday it would be selling £45mln worth of goods via its website, so just one minute of downtime would cost it £75,000 in lost sales (Diginomica.com)

Without doubt Black Friday can work for some retailers, but clearly it doesn’t work for all.

Black Friday: The Good, the bad and the ugly Cutting profit margins during the busiest shopping period of the year doesn’t really make much sense. Not least because it gives retailers less room to manoeuvre if sales closer to Christmas need some extra oomph.

But Black Friday is here and here to stay. So if retailers don’t take part, it’s likely they’ll see their rivals get all the business. And that’s why Black Friday 2016 is likely to be another step-up in terms hype and excitement.

Black Friday has it’s downsides and fisticuffs, but done well, it’s a fantastic opportunity for retailers to win new customers and ultimately increase sales. But preparation is vital. Previous years have taught us that those retailers, who are as prepared as possible, from front-end to back-end, will see the biggest success.

Sources:Marshall, Greg: Citing Sources: [www.techradar.com/news/digital-home/black-friday-2016-1318385] [September 14, 2016]

Canocchi, Camilla: Citing Sources: [www.thisismoney.co.uk/money/news/article-3411721/Shoppers-rein-Christmas-spending-High-Street-retail-sales-fallsharply-compared-2015.html] [January 22, 2016]

Wainewright, Phil: Citing Sources: [www.diginomica.com/2016/02/18/36/-hours-inthe-black-friday-ops-room-at-john-lewis/] [February 18, 2016]

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For more information, please visit https://aka.ms/blackfridayretail