With only 68 days till Christmas this is the most critical time in the retail calendar (it’s estimated that 80% of annual profits occur in these few risky weeks), and given the current turbulent trading conditions it really is make or break time for many.
But like everything else in retail, the festive shopping period is changing and following a traditional merchandising, stocking and pricing festive strategy no longer ensures strong sales and Christmas bonuses.
However, unlike most of the other evolutions happening we can actually identify the main driver for change, when it happened and how to adapt to it.
Traditionally Consumers understood that there was a price premium to pay when shopping in the lead up to Christmas and then as soon as it was Boxing Day there would be huge bargains available. But, in 2013 all this changed, thanks to the import of Black Friday and Cyber Monday trading discounts, a phenomenon that had been around in the US since the 1940s.
In just a couple of years, Black Friday and Cyber Monday have radically altered the UK’s festive shopping habits and retail calendar with the introduction of one of the most infamous sales periods now diarised for the month before Christmas. This has extended the festive shopping period with shoppers using Black Friday to buy their ‘‘big ticket Christmas items’ thus altering traditional festive shopping patterns with November now busier than December.
The retail industry understands that consumers have money to spend on Black Friday/Cyber Monday and FOMO kicks in, in terms of capturing this spend - resulting in more and more retailers starting Black Friday offers earlier - even if they don’t actually believe the phenomenon is good for their own balance sheet - effectively resulting in the whole of November becoming a discount month.
This shift in the pattern of consumer spending has skewed the national retail statistics making it difficult to accurately understand and predict UK consumer spending over the Christmas period, so we here at Mallzee Insights have relied on our own data to analyse what impact Black Friday/Cyber Monday has made, and to understand how UK retailers can optimise the Christmas trading period.
This graph shows the average price drop available in the six month period leading up to Christmas last year, 2017.
Whilst consumers have undoubtedly embraced Black Friday and the promotional activity around it, shown by the frenzied spending over this weekend, this isn’t as price dependent as you might expect. The average discount is actually much lower than those available from August to early November. On Black Friday 2017 the average price drop was only 29% whereas two weeks previously it had been 44% having been consistently in the 40s since September. These findings appear to corroborate a report recently released by Which.
However there is another side to this story and according to our Mallzee Insights data, the volume of products on sale at a reduced price does peak over the Black Friday weekend at an average of 65%, having dropped from August to early November. It is however worth noting that in August the volume of discounted products on the market sat above 60% for two weeks!
This shift in the pattern of consumer spending, prompted an article in the FT, earlier this year stating; “The growth of the Black Friday event has distorted retail sales figures and cast doubt on the official statistics about a sector that accounts for more than a tenth of the UK economy. For the past four years, official statistics have shown sharply rising sales in November followed by a slowdown in December but the Office for National Statistics suggested its seasonal adjustment has been skewed by rapidly changing shopping habits. The 2017 figures confirm this pattern: the volume of retail sales grew by 1.1 per cent in November compared to the previous month, but fell by 1.5 per cent in December.”
Looking at the figures highlights that retailers are developing strategies for handling the disrupted festive shopping period. There is a sudden drop in products available just before the start of November highlighting that many retailers are carefully choreographing which products are being included and discounted. A much more strategic approach to Black Friday than when it first appeared on these shores in 2013 and vital for the success of any Q4 strategy.
One of the most damaging approaches any retailer can take to Black Friday/discount November is trading too aggressively with a resulting stock shortage in the full price period running up to Christmas.
As we enter this peak trading season an understanding of the consumer intent towards your new collections is vital, as it should be year round, and is the key to a successful festive season and the realisation of strong profits for the year. If you’re releasing new products at this time of year it’s imperative to ensure you don’t sleepwalk into over/under stock positions that result in trading troubles that have a long-term effect - it’s no surprise that the highest number of retail bankruptcies happen in Q1.