Black Friday Is Eating Itself (Even in Britain)
(Bloomberg Gadfly) -- It's the U.S. import British retailers could do without.
Black Friday marks the start of what promises to be a difficult Christmas for retailers -- and the blizzard of special offers is a sign this year will be tougher than ever.
With inflation outstripping wage growth and higher interest rates looming, consumers are turning more cautious than last year.
Retail sales were weak in October. Some of that might be due to the period being warmer than the same month last year, deterring consumers from buying a new coat or boots. But many customers may have been holding back for Black Friday's special offers.
This year's season could be particularly concentrated. After a spike around Black Friday, there could well be a cooling off before spending picks up in the last few days before Christmas and the start of the January sales.
So far this year, non-food promotions have been running below their level in 2016, according to analysis by Richard Hyman, an independent retail consultant. But as Black Friday approaches, that's likely to change. If shoppers show signs of holding back between Black Friday and the days before Christmas, retailers could well resort to desperate measures: slashing price to stimulate footfall.
This new shape of Christmas has another pernicious effect. It makes the pressure on retailers' essential plumbing more acute.
Robust websites are always necessary when shoppers have so much choice over where to spend. But on Black Friday, the computers have to cope with extra demand at a time when getting it right is more crucial than ever.
If retailers' sites experience problems, as Argos has in the past, or they introduce other measures to manage demand, such as online queuing, customers are unlikely to hang around.
Logistics are another make-or-break. If shoppers are going to return for more purchases closer to Christmas -- and that's a big if given the current caution -- a bad experience over Black Friday will drive them elsewhere. Marks & Spencer Group Plc suffered a disastrous Christmas in 2014 when it experienced teething problems with a new state-of-the-art warehouse.
Some chains, as Bloomberg News has noted, have tried to avoid the pain by spreading deals across several weeks. Others are offering as few as they can -- but that's tricky when rivals are shouting special offers from the rooftops.
British retailers really have no excuses if their systems don't hold up. Just look at Alibaba's Singles Day as an example of what can be achieved. It managed to generate over $25 billion of sales on its manufactured shopping frenzy. At its peak, it processed 256,000 transactions per second, while its Cainiao logistics network handled 812 million delivery orders.
There's also the looming presence of Amazon.com Inc. Not only did its Black Friday offers start last Friday, the online behemoth has beefed up its U.K. distribution capacity, opening three new warehouses in time for peak trading.
Black Friday, as I keep on saying, is a colossal opportunity for British stores to squander their profitability. They should have left the event on the shelf back in 2010. But it's far too late now, and it shows no sign of going away. Until more retailers wean themselves off it, they're best off focusing on the least glamorous part of their business: making sure their websites don't break and customers' parcels arrive on time.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Andrea Felsted is a Bloomberg Gadfly columnist covering the consumer and retail industries. She previously worked at the Financial Times.
To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net.
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