Using discounts to attract shoppers is by no means a new concept. For decades, UK consumers have had an expectation of brands offering great discounts in the January sales, so much so that it’s almost become the status quo of shopping in the 21st century. While the biggest sales events of the year still represent an opportunity to boost sales for some retailers, the extent to which the UK has adopted new retail events from the likes of the US and APAC has meant the retail calendar is crammed full of discounting periods.
For brands, it’s no surprise they’ve been swept up in the sales fervour and felt obliged to participate, fearing lost market share to competitors if they don’t.
But as the likes of Black Friday and other discount extravaganzas continue to drive prices down at so many key points across the year, the big question is how much damage this is doing to the long-term value of brands in the eyes of consumers. So, what can businesses learn from this years’ Black Friday, and how can they use these learnings to help them prepare for future sales events?
For the last few years, retailers have seen the periods immediately either side of Black Friday slow down. It’s become such a cultural moment that shoppers understandably pause their spending in anticipation of great bargains and sales. In fact, this November sales declined by 1.9 per cent year-on-year, according to the latest High Street Sales Tracker from BDO.
However, what’s important for many brands is the question of whether they can afford to take part. Is a two-week discounting period sustainable for the business, especially in a world of price matching, cashback and voucher codes further curtailing profits? Often, business’ enthusiasm to make the most of Black Friday ends up pulling demand forward from Christmas, eroding their margins for December. The risks of not being active are clear, but each brand needs to be active on their terms.
Linked to this, it’s important that direct-to-consumer brands consider where they want growth to come from. During a mass consumer event there are clear demographics that are more active than others; in the US, for example, 25-34s were the highest spenders according to Forbes. And Statista reports show that under 35s are most likely to spend during the Black Friday period. If these aren’t a brand’s target audience, then perhaps Black Friday isn’t the right time to promote sales.
For subscription businesses there is always tension between acquisition rate and churn; this is intensified during periods like Black Friday. There should be a clear approach to ensure the existing customer base still feels like they are receiving value from a brand. Opening up offers to all demonstrates bias towards new customers but can have significant revenue implications if the offer uptake is monitored and managed carefully. To make the most of this opportunity requires close communication between marketing, commercial and agency teams in order to pull back the throttle if the mix between new and existing customers isn’t right.
As with any major sales event, planning must start months in advance in order to effectively plan for it. Crucially, this planning must revolve around the nature of the offers, as well as whether a business’ infrastructure and fulfilment processes will be able to cope with demand.
It’s essential that consumers don’t have a poor buying experience during the sales periods, particularly when engaging with audiences who wouldn’t normally interact with a brand. Discounting period duration is another consideration, with many often changing their plans up to a few weeks before based on overall business performance. However, last minute knee-jerk reactions can prove costly.
For retailers with limited media budgets, the decision about whether to focus on the weekend itself or to spread the budget across the full two weeks is a difficult one. We’ve seen some retailers this year spend less on Black Friday itself, instead focussing on offering discounts and engagement across a longer period. This helps them avoid the intense competition and inflated digital media costs, and in some cases has driven a 10% year on year increase in sales during the period.
Another potential benefit of Black Friday, and well-planned sales periods, is that they provide the perfect opportunity for businesses to test new innovative routes to market and push ahead of the competition.
For many retailers, untested or unproven routes to market such as social commerce could potentially offer sophisticated, shorter and more frictionless customer checkout experiences on mobile devices. However, rolling them out during potentially key trading periods could be costly or risky.
Looking at the APAC market and the importance of social during their Singles’ Day events, UK retailers still have a long way to go in this space, but the importance of this channel shouldn’t be underestimated for spontaneous conversion and it could grow in significance next year.
However, despite the opportunities Black Friday can present for some businesses, it also carries considerable risks – and for some brands discounting should never be part of the plan, either from a business perspective or alignment with their brand.
This year REI once again closed its stores in a stand against consumerism. While this approach clearly isn’t right for all, and there is a huge risk of a lack of authenticity if this strategy isn’t true to brand, there needs to be careful consideration on taking part. Any participation and discount, or decision to not participate, must align with a brand identity or else risk disenfranchising existing customers.
Ultimately, strong brands perform the best during Black Friday. Effectively communicating a brand identity through hard-working comms will ensure that they are set up for sustainable growth. Not only this, but as consumers are more cautious than ever before, and we can expect them to shop around more. Within this, purchase decisions will be based on more than discounts, but also better value from their preferred brands.
Consequently, the familiarity of customers with a brand and their trust in it are now crucial deciding factors in making a sale. The industry now needs to get to grips with consumers who are not only chasing the best deals, but also expecting the best value deals in exchange for their loyalty.