Black Friday: discounting dangers and early movers

In Industry Comment, Industry News On

A multitude of stores are planning on cashing in on the Black Friday and Cyber Monday hype by launching their sales early, with retailers such as John Lewis having already slashed their prices.

It is predicted that shoppers will spend £1.5bn online on Black Friday alone, up 12% on last year. Market research firm Globaldata expects combined in-store and online receipts will weigh in at £10.4bn across the whole week.

However, discounting does not always have a positive impact on retailers. Research by online payment provider Klarna found that 53% of the retailers surveyed say that sales are having an adverse effect on their profits, with 11% revealing that discounting cost them over £25,000 throughout 2017. It was also noted that 63% of customers don’t return to a retailer after purchasing an item discounted during Black Friday or Cyber Monday.

Optimove chief executive Pini Yakuel commented: “Once a discount period ends, the customers attracted by them will stop coming. We have found that shoppers who make their first purchase from a brand over the discounting season are 19% less likely to return to make a second purchase, rather than someone who buys at any other time in the year. If a business wanted to tap into the Black Friday and Cyber Monday trend, discounting must be used in a strategic way to start and maintain an ongoing relationship with the customer.

“Black Friday is rightfully seen as a critical moment to generate revenue and kick off the holiday trading season, however retailers should retain a long-term mind-set when devising their discounting strategy, and use a data driven approach to foster long term relationships with their new customers.”

Visualsoft head of digital Gavin Lowther also commented on the early moves by several major retailers this year.

“The continued success of online retail means that consumers are better informed than ever and can monitor prices across the market 24/7 – leading retailers to begin discounting earlier and earlier to attract the pre-Black Friday impulse spend,” he said. “This, along with the fact that Black Friday this year falls on the week before payday for most, has led to many major retailers – such as Amazon and John Lewis – having responded by releasing their offers far earlier than the 23rd.

“What’s more, the increased popularity of digital sales channels which allow consumers to shop ‘anytime, anywhere’, such as mobile, social media and even voice, could herald the ‘beginning of the end’ for Black Friday itself. Retailers in future could instead use the term ‘Black Friday’ as a buzzword to draw attention to discounts across the entire month of November to kickstart crucial Christmas sales. Indeed, this November ‘Black Tag Event is already being used as a strapline for the November sales period.”

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