How damaging is Black Friday for retailers?

With many retailers offering deeper and wider Black Friday discounts, what impact does this have long term?

How damaging is Black Friday for retailers?

Black Friday is still a fairly new American import here in the UK, the post Thanksgiving shopping event having been first introduced in 2010 by online giant, Amazon, before going mainstream three years later when Asda (owned by American retailer Walmart) introduced it sparking our first Black Friday Frenzy… and in-store fighting!

Whilst we have welcomed and benefited from many of American imports to my mind Black Friday should come with a health warning... not just for the shoppers and store workers who have been trampled and punched in the rush to get the best bargains, but for the entire retail industry.

With only 27 days till Christmas, this is the most critical time in the retail calendar (it’s estimated that as much as 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 retailers who need to see the tills ring and cannot afford to lose market share.

Traditionally consumers understood that there was a price premium to pay when shopping in the lead up to Christmas and then as soon as Boxing Day hit there would be huge bargains available. Yet over the last few years, Black Friday has radically altered the UK’s festive shopping habits and retail calendar with one of the main sales periods now diarised for the month before Christmas! This has effectively shifted the festive shopping period with shoppers using Black Friday to buy their ‘‘big-ticket Christmas items’ thus altering traditional festive shopping patterns and making November busier than December.

No-one can fail to be aware of just how high the stakes currently are for retailers with the National Office of Statistics once again reporting disappointing retail spend figures for October - down 0.1% year on year.

So what impact is this having on retail's approach to Black Friday 2019 - well more and more are offering deeper and wider Black Friday discounts and for longer! Amazon, the biggest Black Friday winners last year are again leading the way by starting their countdown week on 22nd November and many other retailers have followed suit.

Black Friday feeds into the whole discounting trend that we here in the UK are seeing - with more and more retailers being forced to resort to discounting to bolster revenues regardless of the negative longer-term impact on margins and brand value. How do the Black Friday discounts (on average 40%) compare with the discounts being offered all year? The graph below (based on Mallzee Insights data) shows the average discount and volume of products offered at discount over the last year.

Percentage of products discounted and average percentage of discount monthly

Blue = percentage of products discounted, Red = average percent of discount

Whilst consumers have undoubtedly embraced Black Friday and the promotional activity around it this isn’t as price dependent as you might expect. There are substantial discounts and the volume of products discounted throughout the year with traditional sales periods such as January and mid-summer remain as particularly good times to find a bargain. These findings appear to corroborate a report on Black Friday released by Which.  

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 peak sales 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. 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.

Mallzee Insights helps retailers improve profitability through product testing, our unique approach to data collection helps brands and retailers understand what’s going to work for their audience before they commit to large stock orders, in turn driving gross margin improvement of between 3-6%. With over 4m products tested to date and over 600m customer opinions on them, Mallzee Insights is the largest dataset of consumer fashion opinion in the UK.

Want weekly data insights straight to your inbox? Sign up for The Drop and stay in the know!

Cally Russell

Want to understand how Product Future by Mallzee Insights can improve your margins?

Let’s schedule a time for a friendly walkthrough with one of our retail experts.

Sign up to The Drop

Get ahead of the fashion crowd! The Drop is a weekly email packed with expert analysis, a deep dive into data and unique insights from millions of customer opinions.