Is Black Friday the saviour of Christmas spending for retailers? What’s the secret sauce to avoid plummeting profits and record returns in January? It was only three weeks ago, but it seems like a distant memory now:
Starting pistol fired. Every man, woman, and child desperately climb over each other to get the best priced toaster/toy/thong for their beloved aunt/child/gran. Or that’s what the retailers hoped for.
Online was intense, and fast.
But was it a worthwhile experience for retailers and shopper alike?
SHOPPING IS CHANGING
Although in its relative infancy, Black Friday has quickly evolved – mostly due to our shift towards online shopping, couriers improving service, and the rapid adoption of click and collect on the high street. A recent PwC survey commenting that ‘three quarters of black Friday spending will be done online’.
As the digital realm improves, and the high street declines, Black Friday transforms. It’s moving from the densely populated high-street-assault-course into the ‘How big is your bandwidth?’ marketplace. Although the high street was quiet, Visa reported record rates of transactions on Black Friday.
No longer can we buy into the idea that the high streets are the chaotic backdrops from 2 years ago – please see the hilariously underwhelming BBC ‘Black Friday Chaos’ report.
GOOD OR BAD FOR RETAIL?
At first glance, moving Black Friday online doesn’t seem problematic. In fact, it appears to be the perfect marriage: lowest prices, at the click of a button. Customers can also avoid having to wrestle each other for that cut-price ladle – and revenues are higher than ever (reported figures outperform the previous year).
But is this culture of pre-Christmas discounting truly good for the retailers?
Google and Bing are quick to extol the virtues of high search demand, but are tighter lipped on actual sales numbers i.e. return on ad spend (ROAS), and completely unenlightened on profitability of those searches/sales.
Paul Martin, UK head of retail at KPMG comments: ‘Black Friday doesn’t increase sales, it simply means spending happens earlier. It forces retailers to sell their goods at discounted prices earlier and for longer’.
Bad margins are compounded furthermore when we take into account the extra costs incurred by deliveries, the high costs of servicing click and collect and increased returns- leading to stock being returned too late to sell for Christmas and being out of season in January. More activity, more revenue, but tighter and tighter margins – it’s too easy to be a busy fool, but how can you avoid this?
To overcome this, retailers must approach this period with the best online strategy, going beyond the realms of ROAS and including the profitability of each item for sale. They’ve also got to be ready with precise click and spend limits to avoid blowing all the profit of cut price goods on Google/Bing/Facebook advertising.
If this sounds too futuristic or like a form of ‘Advertising Nirvana’ you’d be wrong, and your FD will be delighted. With AI and Machine Learning, the retailer can make sure that not only are they catching the consumer traffic but also getting it at an affordable price, leading to a Merry Christmas.
The best, and most up to date, digital marketing tools need to be exploited to ensure that their Black Friday/ Cyber fortnight campaigns run better year on year. Without a consideration of this, they could be at the mercy of the ever-increasing discount expectations.
One of Dream Agility’s clients, Cambridge Satchel exemplified this. Without any integration to their website, our AI and Machine Learning driven platform optimised their products, across all of their online marketplaces, so that they could fully exploit the traffic.
This resulted in record breaking figures over the Black Friday period, with revenue up by 92% and costs down by 62%.
Approaching the Black Friday period in the most prepared way possible, and by collaborating with paid search/Google Shopping experts, allowed the leather goods retailer to ensure their Christmas needn’t suffer the consequences of a Bleak Friday.