Earlier this year, when many retailers’ post-Christmas results were being announced, I was surprised to hear Andy Street, John Lewis’s managing director, calling for the UK retail sector to reject the US phenomenon of Black Friday and push back against heavy discounting outside of the electronics market.
Mr Street’s concerns centred on the unnecessary strain events like Black Friday put on businesses logistics and backend systems; he also said that he was concerned by the effect sales events had on profit margins. Many UK retailers made similar comments about increased transactions coming at the cost of reducing margins.
For me that’s a slightly bizarre scenario, I mean, what is your average customer meant to make of a leading retailer asking his colleagues in the industry to ease back on the competitive landscape, so they can all make more profit?
The main point Andy made that I take objection to, is that somehow Black Friday isn’t good for retailers. When improved prices, sales, logistics and backend systems are clearly a good thing for consumers, ultimately don’t all these things make a retailer more competitive within its market?
Despite those comments, Black Friday looks like it’s here to stay for the foreseeable future and John Lewis will have to handle it again this year. The toothpaste is out of the tube and it can’t be put back in.
How the top retailers handle this year’s event will be interesting to see, last year many retailers were surprised by the level of demand, but will they have reacted and put their plans in place in time for this year’s event? There were a great number of household names on the list of brands whose websites crashed last year, and this year failure in the face of stiff competition will be unacceptable, customers rarely forgive you once, let alone a second time.
The systems retailers need to focus on aren’t just about improving their ecommerce sites, retailers need to ensure their back-end stock systems, order processing, warehousing and logistics systems are up to scratch and their after-sales services will also be put under pressure.
How businesses have been able to change in 12 months will depend greatly on the culture of the business and how it is set up to deal with implicating change. There is significant investment that goes into ecommerce systems and this means that they are typically on at least three or five-year investment cycles. Customer service is part of the DNA of a retailer and this takes time to change if the business doesn’t have this culture in place already.
Black Friday seems to be about damage limitation and ‘staying in the game’, as the John Lewis results suggest, and the big money isn’t made on Black Friday – it’s made in the run up to Christmas. Customers, however, are loyal so winning and retaining business on Black Friday might just be the difference between a black or red set of financial results in Jan 2016.
Matt McGrory is managing director of Carrenza.