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GUEST COMMENT Will retailers be able to afford to take part in Black Friday?

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Tony Preedy, managing director of Fruugo

Tony Preedy, managing director of Fruugo, explains why many retailers will be unable to afford to participate in Black Friday this year, and suggests alternative solutions for weathering the cost-of-living storm

Black Friday is fast approaching, and many retailers are reassessing their strategies for this year’s event in light of the ongoing cost-of-living crisis. The much-anticipated global shopping event is famously centred around discounts and, in a year where cost-of-living pressures are so acute, consumers all over the world are likely to be bargain hunting even more this year.

Indeed, according to research from LoyaltyLion, 68% of UK consumers are waiting for Black Friday weekend to make certain purchases, and 67% are more interested in Black Friday this year due to the cost-of-living crisis.

While it’s understandable that consumers might want to delay their shopping until Black Friday weekend, most retailers will need to opt out this year. Recent years have seen a stand-off develop between consumers delaying their shopping until the end November, holding out for deals, and retailers that need to avoid concentrating all their trading into a very short time window. For most retailers, all of their annual profit could be made – or lost – in the six weeks running up to Christmas. While consumers may be motivated to hold off shopping, hoping they will be able to get a discount, retailers need consumers to shop early.

Consumers are of course under huge financial pressures this year, but so are retailers. Business-level cost pressures are the highest they have been in decades, and discounts are hugely expensive to a retail profit and loss (P&L). Although consumers may want discounts, retailers are not in a sufficiently strong financial position to give them.

The remedy for retailers wanting a more profitable holiday trading period is to reduce the number and size of discounts they offer. In some cases, this means boycotting Black Friday completely and communicating this in advance to customers, so they don’t hold out for discounts that aren’t going to happen. Retailers are likely to have to warn shoppers that, due to stock shortages, they will need to buy early this year to be sure of getting their hands on scarce products.

To clear their inventory, retailers must increase the potential audience for their products. By marketing their products at full price via marketplaces – particularly ones that specialise in cross-border commerce – retailers can generate incremental sales at full margin, which avoids the need to sell those units at a discount in their domestic market. Although not great news for consumers, it may be the only way some retailers can survive the cost squeeze they are enduring.

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