Black Friday
  • More disruption ahead for the traditional UK retail calendar
  • When it comes to participating in Black Friday, retailers need to decide early – are you in or are you out?
  • Does Black Friday now mean the January sales are redundant?

Introduction

Black Friday is a well-established American day of promotions centred around Thanksgiving Day. Amazon initially brought the concept across the pond in 2010 but, without question, it was Black Friday 2014 that was a pivotal shopping day in UK retailing history – £1m was spent every three minutes resulting in total sales of over £800m that day and store traffic across the UK saw a 23% jump.

With the increasing power of American brands, it has become impossible to ring-fence the UK and other markets from US retail industry’s online promotions associated with the kick-off to the Christmas shopping season. As Martin Hayward, Founder at Hayward Strategy and Futures, highlighted, “it’s quite a wonder that the day after Thanksgiving was the largest trading day in UK retail last year, when the UK doesn’t even celebrate Thanksgiving.”

Unfortunately the knock on effect of Black Friday 2014 was the weakest December sales growth since 2008 of just 1% and online sales achieved their lowest ever growth of just 5% which suggests that retailers still have a way to go in adapting their sales and promotion strategies to make the most of it.

Notably, it is not just Black Friday that is set to shake up the traditional UK sales/promotion cycle. Now, more than ever, the UK retail calendar is susceptible to outside “disruptors” like Cyber Monday, and more recently, Amazon Prime Day. David McCorquodale, Head of Retail at KPMG, pointed out that “Singles Day in China is the biggest promotions day in the world, driving $9.3bn of sales in 2014, up 61% on the previous year. Being on Remembrance Day will stall its entry to the UK, but not forever.”

So what options are available to retailers who want to reap the benefits of these new discounting periods without incurring the chaos of 2014’s “black and blue Friday”, which saw in-store riots and numerous retailers’ websites fail. The KPMG/Ipsos Retail Think Tank (RTT) met in July to discuss how these new promotional periods fit in to the traditional sales calendar, and what retailers can do to optimise their strategy.

The consumer is now in control

In the past, promotions were driven by the need to shift end of season stock, as a reaction to an unforeseen sales slowdown, or around key events such as Mother’s Day or Christmas. Mike Watkins, Head of Retailer and Business Insight at Nielsen UK, emphasised that “the challenge we have is that shoppers` no longer think in this way.”

The recession and discounting trends within the sector have fundamentally changed the consumers shop. Research from Conlumino reveals that 75% of consumers would rarely buy certain products at full price, and 62% say they wait to buy until a product is on offer or discounted.

In today’s digitally enabled world consumers can shop for anything, anytime from anywhere. No longer are retailers, distributors, or brands in control – it is the consumer that is firmly in the driving seat. “Put simply,” said Mike Watkins, Head of Retailer and Business Insight at Nielsen UK, “we should now consider ripping up the old rule books for promotional strategy.” As such, retailers need to find a way to play their cards better to make the most of this new consumer mind-set.

With high-profile US owned brands pushing it hard, the swathe of media coverage publicising it, and the sales explosion seen in on November 28th 2014, Black Friday looks to be here to stay and the initiative will probably expand into Continental Europe. Maureen Hinton, Conlumino, highlighted that “the issue for retailers is in how they can benefit from this demand, while not losing margin, or damaging their reputations due to operational inefficiencies.”

Learning from the past

To those outside the world of retail, last year’s Black Friday phenomenon may have looked more like an own goal than a dazzling demonstration of clever marketing. As Martin Hayward, Founder, Hayward Strategy and Futures, suggested, the strategy appeared to be somewhat incongruous: “sell lots of product, at very low margin just when shoppers are gearing up to buy lots of product for Christmas, the one time when they really do let go of the purse strings.”

Both physical and online “stores” buckled under the pressure as retailers had not planned for the extraordinary deluge of demand from bargain hunters:

In shops, many retailers struggled to cope with the crushes and the less than exemplary behaviour of “keen” consumers. In the days following Black Friday 2014, media coverage picked up some of the extremes noting that the lack of security which concerned police forces. James Knightley, Senior UK Economist at ING, suggested that in store “retailers need to work on the staffing levels and the location of the key items being marketed.”

In the digital sphere, numerous websites failed with loading times taking considerably longer than normal meaning that retailers lost out as consumers were deterred from purchasing. Negative headlines last year also flagged retailers’ sites, warehouses and fulfilment partners not able to keep up with demand.

However, having lived through last year’s chaos, retailers are in a position to be much better prepared for Black Friday 2015. To avoid website slowdown and even collapse, James Knightly, Senior UK Economist at ING, said “retailers need to stress test their websites to determine whether they can cope.” With such a surge in online orders during Black Friday 2014, making sure web channels can withstand this spike in activity and are fully operational will be crucial.

In addition, retailers might look at ways to control the surge website traffic on the day. For example, for Amazon Prime Day (a single day of discounting in celebration of the retailer’s 20th Birthday) which took place only a few weeks ago, only Amazon Prime customers were eligible for the discounts meaning they had to sign up in advance. Dr Tim Denison, Director of Retail Intelligence at Ipsos Retail Performance, noted strategies such as these “could knock down the frailties of the 2014 Black Friday debacle by delivering a proactive, managed approach, far more refined than the blunderbuss approach adopted by retailers last year.”

So are you in or are you out?

When the concept of Black Friday originally travelled across the pond, reaction from UK retailers was largely split into two camps. Some ignored it completely, preserving margins and hoping that UK consumers would still have an appetite post-Christmas to snap up a bargain. At the other end of the spectrum, some retailers decided to join in, matching bargains pound for pound. David McCorquodale, Head of Retail at KPMG, highlighted that “ultimately, both of these were losing strategies as the former

ceded market share and the latter backfired as retailers had not planned this promotion with suppliers and so were left with reduced margins throughout Christmas and less stock for the ‘traditional’ post- Christmas sale.”

With the benefit of hindsight, retailers therefore have to make a choice, and make it early – they are either in or out – but if they decide to participate, it’s crucial to get the strategy right and this needs meticulous planning and careful execution rather than snap last-minute discounting decisions.

For those who decide to opt out, Martin Newman, CEO at Practicology suggested that “early communication that you won’t be discounting over Black Friday may help to alleviate consumers holding off in expectation of discounts to come.”

Prepare for promotions

Those who accept Black Friday as part of the promotional calendar need to make buying and merchandising decisions promptly, buying specifically for the post-Thanksgiving promotions and building discounts into target margin figures.

In addition, to really make the most of the introduction of a short window of heavy discounting, retailers need to be disciplined in striking the right balance between volume and margin on the day itself as well as for the rest of the Christmas period. Richard Lowe, Head of Retail and Wholesale at Barclays, said: “Retailers shouldn’t assume that they need to dramatically discount all their products. A more nuanced approach, focussed on limited lines and targeted reductions, will help ensure that retailers can realise the benefits of increased volume on Black Friday without disproportionately damaging their margins or lowering the chances of delivering strong overall Christmas results.”

Leverage the logistics network

At the same time, retailers need to be meticulous in thinking through the impact on their distribution and procurement networks. David McCorquodale, Head of Retail at KPMG, described: “a crucial part of any retailer’s sales and promotion strategy is to know what to promote, when to promote it and to have excellence in supply chain in order to be able to both work with suppliers around the promotion and also to fulfil any orders. Mess this up and you probably mess up Christmas itself.” Therefore, enhanced communication with suppliers and logistics companies is essential for the process to run smoothly.

Ensuring that a finely tuned logistics process is in place is also extremely important to safeguard customers receiving their purchases in a timely fashion. Even if retailers are offering the best products at the lowest prices, if they are not able to deliver this could be extremely damaging to a company’s reputation. Nick Bubb, Retail Consultant, said “what will be important is that, as well as funding and “planning” promotions with suppliers, retailers must think through the impact on their distribution and logistics networks of a huge bulge in business at the end of November”. Testing supply and delivery channels throughout the year is a good way to ensure operations are fully functional and able to deal with fluctuations in traffic and demand.

Conclusion

Overall the RTT agreed that Black Friday certainly has made a significant impact on the UK retail calendar, and that impact is likely to grow further. As Andy Street, Managing Director of John Lewis, said “it is impossible to put the genie back in the bottle.”

Given the date itself is somewhat insignificant in the traditional UK calendar, one approach could be to extend the sales event over a whole week, wrapping up Black Friday, Cyber Monday (and the days in between) in a neat little bow. This would certainly reduce the risk of overcrowded stores, alleviate pressures online, and prevent logistics being overstretched.

Moreover, with Black Friday a “fixture” in the minds of the UK consumer it needs to evolve from being just another “tradition” or sales day. David McCorquodale, Head of Retail at KPMG pointed out that “those with supply chain excellence and a genuine understanding of the art of promotion will succeed, and ‘fixtures’ and ‘traditions’ will be eroded.” Martin Hayward, Founder at Hayward Strategy and Futures, added: “in an improving economy, the signs are good that retailers will learn to use this new sales opportunity appropriately, buying special stock well in advance, and protecting the margins on their key lines to gain uplift without substitution.”

However, as Dr Tim Denison, Director of Retail Intelligence at Ipsos Retail Performance, noted “Black Friday 2014 simply served to pull sales forward and threaten margins, rather than grow the size and value of the cake.” As such, it may be that we experience a longer pre-Christmas sales period with the comparative success of Black Friday sales determining retailers pricing and promotion strategy the rest of the holiday period. Should this be the case, maybe the question on retailer’s lips shouldn’t be “what do we do about Black Friday” but instead “do we really need January sales?”

Part II: In detail – Individual views of the KPMG/Ipsos Retail Think Tank members

James Knightly, Senior UK Economist, ING

Retailers may not particularly like Black Friday with frequently heard complaints that it sucked demand out of the market in the lead up to Christmas. However, with well-known US owned chains such as Amazon and Asda pushing it hard and broad media coverage publicising it, retailers will probably have to live with Black Friday. With the idea seemingly having reached critical mass, failure to participate will mean a loss of sales on the day and in subsequent weeks given consumers are increasingly latching onto the idea of using it as an opportunity to bring forward Christmas present purchases. As a result, we may be seeing a more extended pre-Christmas sales period with the relative success of the Black Friday sales determining the pricing strategy for subsequent weeks.

Some retailers have suggested that they will make less of an effort this year. This may be a bit of game theory to try and subtly convince other retailers to not pursue Black Friday aggressively and therefore improve profitability for the retail sector more broadly. However, as we are seeing with Greece, game theory doesn’t always work and can end badly. It may be better for the retailers to talk directly with each other and try to weaken the Black Friday “brand”, labelling it as an Americanism that has no place in the British market.

If retailers do persist with it there are issues that need working on. In store, many retailers struggled to cope with the crowds and the behaviour of “keen” consumers. Media coverage highlighted fights with police forces stating broad dissatisfaction with the lack of security. Consequently retailers need to work on the staffing levels and the location of the key items being marketed.

There was also significant commentary on the failure of websites with loading times taking considerably longer than normal. This meant the potential for lost sales as consumers are deterred and has longer term implications for consumer satisfaction and the perception of the retailer. This suggests retailers need to stress test their websites to determine whether they can cope.

Dr Tim Denison, Director of Retail Intelligence, Ipsos Retail Performance

Without question, November 28th 2014 was a pivotal shopping day in UK retailing history. £2m was spent in stores per minute during the 9 hours of trading. John Lewis sales went up 21% on 2013 and store traffic across the UK was 23% higher. The sales spike created utter chaos for many retailers who simply had not expected the deluge of demand from bargain hunters. It put unprecedented pressure on service levels in store, on website traffic, on logistics delivery, on security and civility.

Post-event analysis is undisputable. Black Friday 2014 simply served to pull sales forward and threaten margins, rather than grow the size and value of the cake. Online sales in December achieved their lowest ever growth of just 5% and overall retailers suffered their slowest December in 6 years. Furthermore reputations were damaged – amongst them Tesco Direct, Currys and Yodel.

It’s clear that “Black and Blue Friday” 2014 cannot be repeated if it is to become a staple fixture in the retail year and a successful part of retailers’ sales and promotional strategy. The event needs to become less chaotic and more profitable. It’s equally clear that the toothpaste is out of the tube: value-seeking consumers will be expectant of mega-deals in Cyber week 2015.

Amazon, which brought the promotional initiative over from America in 2010, has already signposted its solution to last year’s ills, detailing how Black Friday can evolve into something that is better and healthier for retailers rather than necessarily better and bigger for consumers . It aims to offer the best and most relevant deals to its ‘prime’ customers directly and personally. It promises everything that its customers cherish: offers that customers engage with and are tempted by, unrepeatable value and shopping convenience. From the retailer’s perspective it could knock down the frailties of the 2014 Black Friday debacle by delivering a proactive, managed approach, far more refined than the blunderbuss approach adopted by retailers last year.

For conventional retailers there are elements of this strategy that could be borrowed. It needs to evolve from being just another Sales day, with offers on-line and in-store. Digital communication could be used as the sole marketing medium, targeting and conveying in-store offers to selected customers and replacing mass market, ‘first come first served’ approach. The date itself is insignificant this side of the pond, so extending the event over a whole week would also reduce the risk of overcrowded stores, of seeing customers fighting among themselves for limited supply bargains and of overstretching logistics. By gamifying the digital campaigns this approach could stimulate customer engagement and serve to enhance rather than diminish reputation. Black Friday could mark its place in the retail calendar as the event to showcase the best of a retailer’s omni-channel refined capabilities rather than the worst of their raw in-store operational frailties and their customers’ behaviour.

David McCorquodale, Head of Retail, KPMG UK

A crucial part of any retailer’s sales and promotion strategy is to know what to promote, when to promote it and to have excellence in supply chain in order to be able to both work with suppliers around the promotion and also to fulfil any orders. This has become even more vital with the emergence of new discount days which have changed the customary sales fixture calendar, these so called ‘disruptors’ are looking to steal an advantage by offering huge discounts on non-traditional days. Consumers are quick to react positively to a bargain.

In the UK this started through the introduction of Black Friday, a well-established American day of promotions centred around Thanksgiving, by US-owned players such as Amazon and Asda. Initially, the reaction from UK retailers was either to ignore Black Friday, preserve margins and hope that the consumer would still have an appetite post-Christmas to snap up a bargain; or to join in and match the bargains pound for pound. Both were losing strategies as the former ceded market share and the latter backfired as retailers had not planned this promotion with suppliers and so were left with reduced margins throughout Christmas and less stock for the ‘traditional’ post- Christmas sale. However, for those retailers who took this disruption seriously, having lost out on year one, they worked hard with suppliers not to miss out the next time.

Black Friday in 2014 was huge, with £1m being spent every three minutes and total sales of over £800m on the day. This is not a one-off: it is here to stay and will probably expand into Continental Europe. Importantly, it has become a ‘fixture’ in the minds of the consumer. As a retailer, you have a choice – you are either in it or out – but if you participate, you need to get it right. It needs careful planning with suppliers to work out what to promote and to ensure sufficient stock at the right price. It needs execution excellence to fulfil the requirements of the day. Mess this up and you probably mess up Christmas itself. The media scrutiny on the day can be brutal for the brand if you get it wrong. Even smaller retailers, generally disinterested (or filled with dread) by the furore around this new promotional period, feel they have to play, and so look to limit the damage to brand by discounting limited lines to entice customers to explore the fuller range. With so much volume at discounted prices changing hands on a single day, this undoubtedly has an impact on the more traditional sales periods and will take volume away from these.

Not only is Black Friday now a permanent fixture in UK retailer’s calendars, but other days are likely to surface. Singles Day in China is the biggest promotions day in the world, driving $9.3bn of sales in 2014, up 61% on the previous year. Being on Remembrance Day will stall its entry to the UK but not forever. Even Amazon’s 20th birthday is driving another promotion frenzy this week. Those with supply chain excellence and a genuine understanding of the art of promotion will succeed, and ‘fixtures’ and ‘traditions’ will be eroded.

Richard Lowe, Head of Retail and Wholesale, Barclays

British consumers have taken quickly to the American phenomenon of Black Friday. However, the increasingly important role it plays in the Christmas retail season presents a real conundrum for retailers.

The run up to Christmas is the key trading period of the year, so it is natural that retailers should be trying to get as close to full margin as possible. The introduction of a short window of heavy discounting poses a significant challenge – retailers have to ensure that they strike the right balance between volume and margin, both on Black Friday and over the rest of the Christmas season.

The evidence from 2014, where Black Friday helped to contribute to an increase in retail spending of 2.2% in November, followed by the weakest December growth since 2008 of just 1%, suggests that perhaps retailers haven’t quite found that balance yet.

The key for retailers is to position Black Friday as part of their overall strategy without it dominating their entire Christmas plan. Retailers shouldn’t assume that they need to dramatically discount all their products. A more nuanced approach, focused on limited lines and targeted reductions, will help ensure that retailers can realise the benefits of increased volume on Black Friday without disproportionately damaging their margins or lowering the chances of delivering strong overall Christmas results.

It is worth noting the role of Cyber Monday too. Its growth has helped establish the four day period starting with Black Friday as a crucial part of the season, with some retailers even launching a full week of discounts around this time. Such an approach may be right for individual retailers, but it is essential that they assess properly the value of extended reductions before committing to it.

Black Friday certainly has made a significant impact on the retail landscape over the last couple of years, and that impact is likely to grow further. It is important that retailers do see this as a positive opportunity that can feed into their wider sales and promotion strategy. However, to really benefit from this development, retailers have to employ a disciplined strategy that ensures margins are not pushed too far and volumes do not suffer significantly during the rest of the Christmas season.

Martin Hayward, Founder, Hayward Strategy and Futures

It’s quite a wonder that the day after Thanksgiving was the largest trading day in UK retail last year, when the UK doesn’t even celebrate Thanksgiving.

What it does demonstrate is that the inherent hunter-gatherer in all of us can be brought to the surface relatively easily if the potential pickings are rich enough, and they certainly were on Black Friday last year. But rich pickings for consumers come at a cost for retailers and the post event analysis clearly showed that despite a big spike in revenues it was, as Andy Street of John Lewis explained, “More challenging profitability-wise”.

To those outside the industry, the whole phenomenon does look more like an own goal than a brilliant piece of marketing. Sell lots of product, at very low margin just when shoppers are gearing up to buy lots of product for Christmas, the one time when they really do let go of the purse strings.

The secondary impact was also major, dampening the post-Christmas sales period, probably the nearest thing to a real, rather than manufactured clearance that most retailers need to clear the decks.
So where does it go from here?

Again to quote John Lewis’ Andy Street “I don’t think we can put the genie back in the bottle”, so it looks like we have another sale cycle to include in the calendar whether we like it or not.

It is likely that the grocers will continue to embrace the phenomenon keenly as a chance to sell larger ticket items (mainly electricals) that they otherwise wouldn’t, but for the rest of the market we are likely to see a more cautious approach to protect margins and defend the post-Christmas sale period.

Although not a perfect parallel, we did see a similar hysteria to reality cycle recently when Groupon, the online discounter, arrived on the scene. Mass consumer take-up, lots of unprofitable sales, consumers realise they’ve bought stuff they don’t need, phenomenon fades.

In an improving economy, the signs are good that retailers will learn to use this new sales opportunity appropriately, buying special stock well in advance, and protecting the margins on their key lines to gain uplift without substitution.

Nick Bubb, Retail Consultant

Many UK retailers will have been planning promotions for November 27th for nearly a year…after the explosion of consumer interest in the US import of Black Friday last year.

The increasing global power of American brands like Amazon, Apple and Wal-Mart has meant that it has become impossible to ring-fence the UK and other markets from the Online promotions associated with the US retail industry’s traditional attempts to kick-start the Christmas shopping season on the day after Thanksgiving Day (the US holiday on the fourth Thursday of November). And in 2013 the way the calendar fell meant that Black Friday was the latest that it could be in November.

But until 2014, Black Friday was still largely an Electricals phenomenon, although John Lewis was drawn more into it because of its increased commitment to be “never knowingly undersold”.

What helped make Black Friday different last year was that the UK industry focused more of its promotional calendar on the “pay-day” period at the end of the month, which always seem to get consumers in a spending mood.

And after a difficult autumn, Clothing retailers had a lot of stock to shift, so it was their attempt in particular to exploit “Black Friday” as a promotional event that made it a much bigger deal in the UK in 2014, even though the UK Christmas shopping season begins much earlier than in the US, rightly or wrongly…

Notwithstanding Argos’s caution about its profit impact, “Black Friday” was a reasonable success for Electrical retailers, notably Dixons Carphone, with the manufacturers financing most of the promotions, but it was a disaster for most other Non-Food retailers…

It caused a huge pull-forward of sales from December and January, it strained distribution networks, it undermined consumer’s willingness to pay “full-price” at Christmas and it ruined perceptions of Online delivery reliability.

Seb James of Dixons Carphone loves it, but I am with John Roberts, the feisty boss ofAO.com, on this: “Black Friday” is like “a drug addiction for shoppers”, he thundered at a conference in London in early February and “Anybody who says they planned it and executed perfectly either had a terrible Black Friday or is lying”.

I think that it has got a lot to answer for and Clothing retailers would be wise to emulate the pricing policy of Next and to try to avoid it this year, weather permitting…

Unfortunately, as Andy Street of John Lewis says, it is impossible to put the genie back in the bottle and retailers won’t back off “Black Friday” this year, because the timing is only one day earlier than last year, again coinciding with “pay-day” at the end of November (next year it is 2 days earlier).

What will be important is that, as well as funding and “planning” promotions with suppliers, retailers must think through the impact on their distribution and logistics networks of a huge bulge in business at the end of November. And they will have an early test of their capability, when Amazon launches “Prime Day” on July 15th…

Martin Newman, CEO, Practicology

In the past couple of years, the migration of Black Friday promotions from North America to this side of the pond has caused an upset to retailers’ peak trading promotional calendars. With US brands such as Amazon and Asda (Walmart) leading the way, UK retailers have felt obliged to follow suit, often without the ability to accurately forecast the consumer response.

This led to the many negative headlines seen last year with retailers’ sites, warehouses and fulfilment partners not able to keep up with demand. Whether you agree with the principle of pre-Christmas discounting or not, unless you sell unique product you are likely to be dragged in. So better to plan for it and manage your margins and forecasting, rather than make snap last-minute discounting decisions.

By accepting that Black Friday is a part of the peak trading promotional calendar you can make buying and merchandising decisions early, buy specifically for Black Friday promotions, and build the discounts in to your target margin figures. At the same time, forward planning with your warehouse and logistics partners should help minimise operational issues over the Black Friday weekend itself.

You must accept that this addition to the promotional calendar will cause a shift in consumer spending patterns, rather than raise overall demand during the peak trading period. In particular, consumers may hold off spending in the run-up; and it certainly has a negative impact on consumers’ willingness to spend during the traditional post- Christmas Boxing Day Sale period.

There are few retailers/brands who can escape this, some of whom may have unique product, others are mono- brand. Indeed there was evidence last year that those who chose not to participate in Black Friday promotions managed to maintain good sales and margin. Two examples being Ted Baker and White Stuff.

For those who want to avoid pre-Christmas discounting of their product, early communication that you won’t be discounting over Black Friday may help to alleviate consumers holding off in expectation of discounts to come.

Mike Watkins, Head of Retailer and Business Insight, Nielsen UK

The digitally enabled world of shopping for `anything, anytime and from anywhere` has tipped the balance of power so that consumers are now in control – not retailers, distributors, brands, media or content owners. Put simply, we should now consider ripping up the old rule books for promotional strategy.

Promotions in retailing have for many years been shaped around the need to clear seasonal stock, to react to an unexpected slowdown in sales (often weather related), or the creation of `events` planned in advance to artificially stimulate demand.
The challenge we have is that shoppers` no longer think in this way.

In non-food retail they are more likely to plan spending in advance and to a specific budget; they are price comparing and for bigger ticket items may even wait for prices to fall further. In food retail, we see consumers shopping around more and more and chasing the promotional discounts across the Supermarkets, who are only too willing to offer `everyday` promotional savings of over 30% of the shopping basket. Are these really promotions?

The outlook for retail is that consumers will remain inherently cautious about discretionary spending, so we need new strategies and customer propositions that really do save consumers money, and at the same time, generate incremental demand.

Promotions will have to be multi-channel, which brings with it the risk of adding to supply chain costs but more importantly, strategies need to be technology driven, where `big data` is key to making the crucial supply and margin decisions. These also have to be made in real time.

So we have a new event that fits this bill; one which has now become embedded into modern retailing – Black Friday – or more likely going forward, a number of Black Fridays throughout the year albeit labelled differently (the 1 day Amazon Prime event in July 2015 being just one example).

Whilst Nielsen analysis shows that Black Friday in November 2014 did not deliver incremental food sales it did serve to kick start what was the slowest start to Christmas trading in over 10 years. Perhaps that’s the primary objective in these changing times.

A peak event that now needs to be hardwired into retail execution.
“It’s a promotion Jim, but not as we know it “is the new mantra in many of our board rooms.

Maureen Hinton, Conlumino

Following the sensation Black Friday caused in 2014, it has undoubtedly become a fixture in the retail promotional calendar. Being the last pay day weekend before Christmas, many retailers already used this weekend for promotional activities in order to grab some consumer spending early on in the Christmas season, and to pre-empt spending at competitors. However giving it a name, albeit borrowed from the US, has focused shoppers’ attention far more effectively on the date; so effectively spending was higher that week than during the usual Christmas peak. Indeed it focused consumer spending so effectively it hit post Christmas clearance sales too, having brought forward so much of that potential spend.

The recession and the amount of discounting and promotional activity there is now in retail, have changed the way consumers shop. Our own research at Conlumino reveals 75% of consumers say they rarely buy certain products at

full price, and 62% say they wait until a product is on offer or discounted before buying. Having introduced Black Friday there is now an expectation from consumers that it is here to stay.

The issue for retailers is in how they can benefit from this demand, while not losing margin, or damaging their reputations due to operational inefficiencies. The electricals sector probably has the hardest challenge due to the dominance of brands and ease of comparison, bringing it down to price alone. In clothing, where private labels items are not comparable, there is an argument there is no need to discount because consumers are prepared to pay full price anyway. That said even full price spending can be impacted, because following Black Friday consumers have less to spend on full price products.

Therefore no matter which sector you are in there will be some impact from Black Friday and retailers have to decide how they are going to deal with it. The options are to participate fully in the discounting and promotional frenzy, or to tailor your own promotions (and margin) to piggy back onto the event. Or of course ignore it completely, but this is only something the most prestigious, in-demand brands can do.

Date Published: 9/15/2015 2:00 PM

Note to Editors:

The RTT panellists rely on their depth of personal experience, sector knowledge and review an exhaustive bank of industry and government datasets including the following:

Members of the RTT are:

  • Nick Bubb – Independent Retail Analyst
  • Dr. Tim Denison – Ipsos Retail Performance
  • Jonathan De Mello – Harper Dennis Hobbs
  • Martin Hayward – Hayward Strategy and Futures
  • Maureen Hinton – Conlumino
  • James Knightley – ING
  • Richard Lowe – Barclays Retail & Wholesale Sectors
  • David McCorquodale – KPMG
  • Martin Newman – Practicology
  • Mike Watkins – Nielsen

The intellectual property within the RTT is jointly owned by KPMG (www.kpmg.co.uk) and Ipsos Retail Performance (www.ipsos-retailperformance.com).

First mentions of the Retail Think Tank should be as follows: the KPMG/Ipsos Retail Think Tank. The abbreviations Retail Think Tank and RTT are acceptable thereafter.

The RTT was founded in February 2006. It now meets quarterly to provide authoritative ‘thought leadership’ on matters affecting the retail industry. All outputs are consensual and arrived at by simple majority vote and moderated discussion. Quotes are individually credited. The Retail Think Tank has been created because it is widely accepted that there are so many mixed messages from different data sources that it is difficult to establish with any certainty the true health and status of the sector. The aim of the RTT is to provide the authoritative, credible and most trusted window on what is really happening in retail and to develop thought leadership on the key areas influencing the future of retailing in the UK. Its executive members have been rigorously selected from non-aligned disciplines to highlight issues, propose solutions, learn from the past, signpost the road ahead and put retail into its rightful context within the British social/economic matrix.

Definitions:  The RTT assesses the state of health of the UK retail sector by considering the factors which influence its three key drivers.

1.  Demand – Demand for retail goods and services.  From a retro-perspective, retail sales, volumes and prices are the primary indicators.  When considering future prospects, economic factors such as interest rates, employment levels and house prices as well as others such as consumer confidence, footfall and preferences are used

2.  Margin (Gross) – Sales less cost of sales; the buying margin less markdowns and shrinkage.  Cost of sales include product purchase costs, associated costs of indirect taxes and duty and discounts

3.  Costs – All other costs associated with the retail operations, including freight and logistics, marketing, property and people

The Retail Health Index – how is it assessed?

Every quarter each member of the RTT makes quantitative assessments of the impact on retail health of demand, margins and costs for the quarter just completed and a forecast of the quarter ahead.   These scores are submitted individually, collated and aggregated in time for the RTT’s quarterly meeting.  The individual judgements on what to score are ultimately a combination of objective and subjective ones, drawing upon a wide range of hard datasets and softer qualitative material available to each member. The framework follows the example of The Bank of England Agents’ scoring system on economic intelligence provided to the Monetary Policy Committee.

The aggregate scores are combined to form the Retail Health Index (‘RHI’) which is reviewed at that meeting and occasionally revised after debate if members feel it appropriate.  The RHI tracks quarter on quarter changes in the health of the UK retail sector and as such provides a useful and unique measured indicator of retail health.  The index ‘base’ of 100 was set on 1 April 2006.  Each quarter, it assesses whether the state of health has improved or deteriorated since the previous quarter.  An improvement will lead to a higher RHI score than that recorded in the previous quarter, and with a deterioration leading to a lower score.   The larger the index movement, the more marked the shift in the state of health.

The RHI has two main benefits.  Firstly, it aims to quantify the knowledge of the RTT members in a systematic way.  Secondly, it assesses the overall state of health of the UK retail sector for which there is no official data.

For media enquiries please contact:

Max Bevis, Tank PR

Tel: +44 (0)1159 589 840

Email: max@tankpr.co.uk

shutterstock_234494839_web

The platform era and its impact on the retail industry

Whilst change is nothing new to the retail industry, the rise of ‘platforms’ marks the latest chapter in the industry’s story.

The KPMG/Ipsos Retail Think Tank chose to discuss retail platforms and what is driving this new evolutionary phase in their latest whitepaper.

Read More
London retail

Retail growth will stagnate overall in 2017, warns KPMG/Ipsos Retail Think Tank

• Very limited retail growth in 2017, as any growth in non-discretionary retail will be clawed back by a decline in discretionary spend • On average 5 – 8% increase in retail prices in 2017, albeit varying across categories of retail • In light of increasing commercial headwinds, more retailers will leverage technology, consider multichannel…

Read More
.