Black Friday – UK Retail’s Darkest Day
Views and expectations for Black Friday 2018, ONS Retail Sales figures for October, impressive HY figures from B&M and Q3 figures from Card Factory.
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- Somewhat overshadowed by political events, the ONS figures for retail sales in October were mildly disappointing at worst. Year-on-year retail sales values were up 3.4%, while volumes (i.e. net of inflation) were up 2.7%. Not disastrous by any means (and certainly not a decline, as reported by most of the media), but a slight slowdown on the exceptional growth levels of previous months. A combination of the ongoing mild weather, plus consumers holding back in anticipation of Black Friday (for more on this, see below)?
- Strong figures from B&M, reporting a double digit rise in half-year revenues and profits. For the 26 weeks to 29 Sep, the value operator posted a 16.1% increase in group revenues to £1.56 billion, while pre-tax profits saw a 32.5% rise to £115m. In the UK, where the group trades from 598 B&M stores, revenues increased 7.1%, although like-for-like growth was a relatively modest 0.9%, versus 7.5% in the corresponding period the previous year.
- Card Factory has reversed the decline in like-for-like sales in its third quarter. The business reported a 3.4% increase in revenue in the nine months to 31 Oct. Store like-for-likes declined 0.5% over the nine months as a whole, but edged up by 0.1% in Q3. FY EBITDA expectations remain unchanged in the range of £89m to £91m. Card Factory has opened 41 new UK stores in the year to date, 16 of which were opened in Q3, and is on track to open a total of 50 in the full financial year.
Stephen Springham, Head of Retail Research:
Black Friday – more damaging to the UK retail sector than Brexit and the rise of online combined. Discuss.
I have never made any secret of my abhorrence of Black Friday. At best, it is the ultimate in lazy and unimaginative marketing. The retail sector collectively shooting itself in the foot.
Far from a ‘sales bonanza’, much more an exercise in damage-limitation. The ugliest face of consumerism amongst shoppers. At worst, a margin-sapping, throat-slitting exercise in copy-cat desperation amongst retailers of epically suicidal proportions. That is my pre watershed summation, the uncut version is far more damning.
Effectively, there is a week to go until this year’s ‘extravaganza’ on 23 November. Except there isn’t, as many businesses are already running Black Friday promotions. Last year, I purposely kept watch for the first Black Friday promotion or advertisement. The first business to launch one? Talk Talk in late October.
A telecoms company, a full month before the actual day. So what was conceived as a one-day retail spectacular is now a protracted period of marketing that virtually every other business sector you could name has hijacked. Proof, if any were needed, how ludicrous the whole thing is.
From a purely retail perspective, Black Friday has evolved considerably in the five years it has featured in the UK. The nadir was definitely 2014, when retailers jumped lemming-like onto the bandwagon and got badly burnt, either counting the PR cost of consumers fighting over goods instore, or having to deal with massive supply chain bottlenecks. We have since seen something of a scale-back, although this is not always apparent in the levels of marketing noise.
I would expect the direction of travel of recent times to continue this year – elongation of the Black Friday period (Cyber Monday has effectively been subsumed into a wider 2 week period), electricals being far and away the most dominant product category and it being more an online than a store-based event (Black Friday itself being a normal working day in the UK, as opposed to a public holiday in its native US).
Retailers basically fall into five general camps. Those that still go for it hammer and tongs (‘Full Embracers’), which tend to be the major players in electricals (e.g. Amazon, Dixons Carphone, Argos).
A level down from that are the ‘Desperados’ that offer a blanket (20%/25%) discount across their full range. Thankfully, these are becoming fewer and fewer – how many retailers can afford a 25% hit to their gross margin? A number of retailers still partake in Black Friday as they are ‘Caught in the Crossfire’, a key one being John Lewis.
It is effectively drawn in because of its Price Promise. But most retailers probably fall into the fourth category – ‘Paying Lip Service’ – in it because they think they have to be, make a lot of noise about it, but deliver very little.
At the opposite extreme to ‘Full Embracers’ are ‘Abstainers’, a camp that includes the likes of Marks & Spencer, Primark, Fat Face, Selfridges and this year, B&Q.
The mechanics of Black Friday have also changed. Whisper it, but a lot of the ‘discounted’ product is actually sourced or manufactured specifically for Black Friday. In effect, therefore, its price point isn’t fixed and any flagged ‘discount’ is notional – shoppers aren’t actually bagging themselves a bargain. This may be less damaging to retailers’ margins, but is perhaps more damaging in other less quantifiable ways.
A constant barrage of promotions and seemingly continuous discounting are two of the key forces that have undermined the UK retail sector in recent years. And some.
Brand equity in retail is everything and constant discounting completely debases this. Price fluctuations send out very mixed messages and confuse consumers. If a retailer doesn’t appear to have faith in its own brand and pricing, why should its customers?
Too many retailers are alienating the most important facets of their whole business – their customer base. It is surely no coincidence that most ‘Black Friday Abstainers’ are actually the best performing operators on the high street – retailers that have faith in their brand, know their customers, value them and maintain their trust.
To answer the original question: in isolation, Black Friday probably isn’t more damaging that Brexit and the rise of online combined. But the culture of constant promotion and discounting and associated brand devaluation definitely is. And Black Friday is the single biggest manifestation of what is harming UK retail most.