Changing consumer spending habits inculcated by the cost of living crisis and impending recession is likely to see Black Friday sales to be down 5% Year-on-Year (YoY), with indications that it could fall even further.
At a category level, clothing will likely be the highest underperforming group, while Home & Garden is currently showing the best outlook on last year’s figures. However, despite its growth it’s still expected to be negative during the peak trading.
So warns IMRG Cap Gemini in a gloomy pre-Peak outlook note published today. “The real problem for online retailers is a drop in conversion,” says Andy Mulcahy, Strategy and Insight Director, IMRG. “While sales growth has been negative for over a year and a half, there is actually still growth in traffic to retail sites. The number of visitors who complete a purchase has dropped 20% in 2022 against the same time last year, with the main pinch-point being less people adding items to their basket from the product page. There is a lot of industry anxiety over peak trading, and the honest reality is that if retailers could guarantee sales for Black Friday week, as per our forecast, they would probably take that. It’s well documented that things are very tough at the moment, if the situation deteriorates further, it really will be cause for alarm.”
Diving deeper
Taking a deeper look into the various aspects that might be affecting this year’s Black Friday sales, Simon Binge, Commerce Senior Manager, Customer Transformation at Capgemini , believes retail faces a number of challenges.
For starters, he says, retailers will be facing into enormous costs pressures across cost of goods, transport, energy and overheads, but will be cautious on passing the full burden of this onto consumers.
“While traditionally Black Friday has focused on money-off or percentage-off discounts, the cost challenges this year will lead to many retailers exploring value-add and bundling promotions,” he says. “By bundling products together, retailers are able to drive higher average basket value whilst improving unit economics through efficiencies in warehousing and fulfilment.”
Binge also believes that campaigns will start earlier and run later. “It’s well documented that many retailers will be heading into Black Friday with excess inventory due to a summer of depressed sales combined with supply chains strategies brought into play to combat disruption,” he says. “Black Friday is a key period for clearing through excess supply, but with the aforementioned cost challenges, retailers may struggle to offer deep enough discounts to win the share of attention necessary in such a short-window.”
According to Binge, many retailers will be looking to bring forward their key campaigns, and potentially run them longer than usual.
“Amazon’s October Prime Day event is an example of a retailer trying to bring forward the promotional period and generate buzz,” he says.
Nielsen reported the event landed well with consumers as a ‘subdued’ Black Friday prequel. With consumers eager to strategically capitalise on sales and with many earmarking budget to utilise over the sales period, retailers should use this opportunity to sway consumers’ purchasing decisions.
Other pressures mount
Black Friday is already the most expensive digital marketing period, but combining that with a World Cup means retailers will face spiralling acquisition costs, warns Binge.
“To combat this, retailers will need to focus on increasing order frequency from their existing customers through personalised offers and incentives,” he says. “Similarly, owned channels & organic marketing like email, unpaid social, content blogs etc are lower cost alternatives to generating site traffic.”
Finally, with commercial challenges affecting the depths of discounts available, quality of service will become a big selling point. According to Binge, retailers who offer fast, free delivery or omni-channel fulfilment & returns, will want to make sure this is marketed clearly, communicated frequently and, most importantly, delivered convincingly.
