FRIDAY I’M IN LOVE

The theme of this blog is about the Black Friday phenomenon that has been around in various guises since the 1930’s in the USA. Traditionally it falls on the day after Thanksgiving Day and is seen by retailers as an opportunity to encourage shoppers to come to their stores and benefit from low prices and special promotions that are on offer on that day. Many companies in the US market also traditionally have given employees a day off to make the celebrations into an extended weekend: Black Friday is seen as an effective initiative to create interest and diversion for people during this holiday period.

Some commentators trace the name to the fact that it is often the first day in the year when retailers begin to make a profit: moving into the black as opposed to into the red. The latter signifies losses.

In theory, and partially in practice, prices are slashed and it is designed to whip shoppers into a frenzy of excitement where they will slash out a month or so ahead of the main Christmas shopping season.

Due to its popularity in the USA, it quickly spread to the UK and other parts of Europe as non-US retailers also wanted to cash in on the extra sales and profits.

With predictable inevitability Amazon also jumped into action and drove a spate of online activity around this date.

As is the case with many aspects of retailing, the large retailers expect much of the transactions to occur via the online medium. In 2016 around twenty retailers will participate aggressively in Black Friday promotions and activities. They range from Halfords and TK Maxx to Asda and Toys R Us.

Inevitably and because largely of its popularity such retailers have actually started the campaigns and promotions well ahead of the actual day itself. On average many of them launched their activities twelve days beforehand. Discounts on regular prices can range from 20 to 50 per cent.

Even more problematic is the extension of the concept of Black Friday. We now have Cyber Monday and Giving Tuesday in addition.

What are we to make of this phenomenon?

As you may recognise from previous blogs I tend to adopt a cynical view of most things in life and with retailing in general. I am particularly cynical with the activities of retailers with respect to pricing and promotional campaigns. We have witnessed the demise of traditional sales periods such as immediately after Christmas and into the months of January and February Traditionally in these months retail trade is slow in many European countries and in the North American market due to the excesses and splurges of shoppers in the period leading up to Christmas.

In the North American market over the past decade or so, retailers have increasingly started sales campaigns and promotional offers as early as the end of October in an attempt to generate footfall and sales. Online retailers such as Amazon and ASOS have consistently run such campaigns throughout the year. Black Friday is perhaps the most publicised attempt to capitalise on early sales campaigns and certainly has attracted much publicity in the general media.

These campaigns in general and Black Friday in particular have had both positive and detrimental effects on business. They certainly have engendered excitement and expectation among shoppers in both the USA, and parts of Europe. This is evidenced by visual clues such as queues of people waiting outside stores overnight, in an attempt to capture the very best possible deals when the doors open.

In the UK John Lewis generated a 15.5 per cent increase in internet sales during Black Friday and claimed to have created sales of £187.7 million in one week.

However a number of myths have emerged about the concept of Black Friday and its supposed effectiveness.

A quick perusal of google will reveal to you a number of articles debunking Black Friday. For instance in the USA market it is commonly assumed that it generates the most sales and footfall in a calendar day. In fact for a number of years the last Saturday before Christmas supersedes Black Friday on both counts.

This article (https://www.msn.com/en-gb/money/shoppingandvouchers/the-truth-behind-10-black-friday-myths/ar-BBmVx5w) identifies a number of myths such as the following ones.

Myth: Stores will match competitor’s prices

Many large retailers have price-matching policies that guarantee they will match (or beat) lower prices advertised by competitors. Read the fine print, however, and you’ll see that most of these policies don’t apply from Thanksgiving through Cyber Monday. Shoppers can try bringing along a print ad from a circular or local newspaper and hope for a generous clerk, but others standing in the interminable checkout lines may not appreciate the attempt.

Myth: Most shoppers score amazing bargains.

Black Friday sales thrive on the illusion of deep discounts. A study commissioned by The Wall Street Journal, however, found that better deals on a wide assortment of products pop up throughout the year — and that includes December. Moreover, the biggest deals often are available in extremely limited quantities, which means only a few folks enjoy anywhere close to the bargains that ads promise. And then there’s this: Retailers don’t just give away merchandise and suffer the profit consequences. According to industry analysts, prices that have been so generously lowered already factor in the target profit margin. Sure, holiday shoppers are getting a good deal, but so is the merchant.

 

 

Myth: High-end retailers don’t participate.

 

 

In addition to department stores such as JC Penney, Sears, Macy’s, and Kohl’s, upscale stores play the price-cut game. For luxury apparel at discounted prices, check Nordstrom, Neiman Marcus, Eddie Bauer, The North Face, and Bloomingdale’s. The big shopping day also may be the moment to drive off in a luxury car. Companies such as Mercedes-Benz, Audi, and BMW often offer Black Friday specials. Some industry analysts recommend waiting until December, however, when year-end prices fall further.

Similar myths have been exposed in the UK market.

A report recently produced by the Which organisation (https://www.theguardian.com/business/2016/nov/16/black-friday-uk-warning-report-half-offers-real-deal-pricing) shows that many items that were promoted on special price deals were in fact cheaper in the months before and after Black Friday. “The study investigated 178 deals from Black Friday 2015 tracking the daily price moves of 20 popular electrical gadgets on Amazon, AO, Argos, Curry’s and John Lewis for three months before and two months after Black Friday.

They found that only 90 deals were cheapest on Black Friday. A Curry’s promise of a £101 saving on a Samsung TV was not as good as it looked, as the £748 price tag was only a pound less than on the eve of Black Friday and it had been on promotion at £699 in September. AO trumpeted a £200 saving on a Vax vacuum cleaner at £99, yet it had been on sale for £69 the previous day and on average for £96.50 in the three months leading up to Black Friday.”

What can we learn from these observations?

Firstly as with many such “apparent” special deals, we need to be careful of their full value and authenticity. Such deals do not always do “what they say on the tin”. This is exemplified in the way in which the “was” price was quoted. Government legislation requires retailers to quote a price is supposed to be the most recent price the item has been sold at for 28 consecutive days or more. In many cases the Which study suspected that this was note happening. Instead retailers were quoting a price which was an older and higher “was” price. While this is disputed by the retailers it nonetheless highlights mechanisms by which retailers can distort the picture and add to the layer of confusion among shoppers.

Black Friday certainly adds to the intrigue and excitement for shoppers. However shoppers should beware of some of the claims and special offers. Retailers in my view have devalued the impact of Black Friday by introducing other concepts as Cyber Monday and instigating special deals a couple of months beforehand. The concept still holds value but is likely to be superseded by yet more gimmicks and initiatives. Let’s see.

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