Why is Black Friday making retailers blue?

Originating in the U.S. as part of the Thanksgiving holiday celebration, Black Friday discounting arrived in the U.K. in 2013 via Walmart affiliate, Asda, and, as other retailers followed suit, has quickly become a key date in the UK shopping calendar, with electronics and fashion items especially popular. This year it falls on the 25th November with bargains available online from midnight, but for retailers the one day shopping bonanza is not entirely welcome and debate continues about the sustainability of this annual event.

In the U.S., where it all began, there is concern over Black Friday ‘creep’ in which the focused day of shopping after Thanksgiving has begun to spread into Thanksgiving itself as retailers attempt to win as much market share as possible. Others, such as Mall of America are making a virtue of closing on Thanksgiving, showing respect for the holiday and for their employees, to win public approval. Sports retailer REI will close on Black Friday itself, encouraging customers to “#optoutside”, and hopefully make their purchases for ‘opting outside’ throughout the rest of the month.

In The Guardian newspaper, David McCorquodale, head of retail at KPMG, explains the negative impact of building up customer expectations for a big discount day at the end of the month – “Last year, Black Friday was bigger than Christmas, with promotions running over four days, so people are holding off spending and that diminishes retailers’ sales in the weeks before and after”

In the U.K. retailers are aware that it is a difficult trend to reverse with so much revenue generated in one day. Fashion retailer Jigsaw, not wishing to participate, but recognising that there is customer expectation, has explained their position in their pricing manifesto. By sticking to traditional bi-annual retail sales they hope to reassure their customers that the quality products bought at full price one week will not be slashed the next and that reductions in the sale will be end of season stock only. Ted Baker boss, Ray Kelvin, was quoted in Retail Week saying “No-one wants Black Friday” – they would prefer not to be involved but their concessions in participating department stores makes it difficult for them to avoid.

The concern, particularly with fashion retailers, is that customers have been educated to expect discounting when they could previously rely on full priced sales, and to maintain momentum up until Christmas, promotional discounts will need to continue throughout December. With the weak pound affecting consumer confidence, customers are also more likely to be seeking out bargains and shopping around for the most competitive prices.

Also, heavy traffic in stores – sometimes requiring crowd control measures – resulted in an increase in online shopping in 2015, putting pressure on websites (slow or crashing) and pressure on distribution centres across the country. In addition, the spike in sales produced by the ‘flash sale’ nature of Black Friday also resulted in a spike in returns adding to supply chain pressures with extra handling and fluctuating stock levels.

As Vicky Brock, CEO of retail technology firm, Clear Returns, explains “The result is businesses frequently face a period of time in which they are short of stock while it is out in the supply chain or being considered by customers. The challenge with Black Friday is where it sits in the year – that final weekend of November. Typically, the cycle of returns becoming available to sell again is 15 to 21 days, so that stock, if everything went well, would just about be re-available to the retailer to sell on 20 December – past peak Christmas trading.”

As Black Friday looks set to remain a prime shopping day, and spreads around the world – Souq.com in the Middle East runs its version ‘White Friday’ and Alibaba in China has the massive Singles Day – it seems unlikely that this trend will reverse any time soon. So how do retailers retain their most loyal and most profitable customers and avoid a deluge of costly, margin-shredding, returns at their most important trading time? Retailers can reduce the impact if they think carefully about the products they are promoting – returns are higher risk in certain categories and sub-categories than in others. They should also consider that products are likely to go out of stock as a consequence, and, considering customer time to return and the retailers processing time for returns, unlikely to become available for sale in time for the Christmas peak. Future sales to customers who would keep these purchases are then lost and the returned stock ends up in the post-Christmas sale, with a low margin and all the added operational costs – including premium Christmas delivery and expensive warehousing.

Clear Returns award-winning predictive data technology focuses marketing on the customers who will keep their purchases. Keep optimisation is a solution that eliminates marketing driven returns by encouraging costly customers, who sit on premium stock, away from these purchases towards products they will keep and releases the stock for profitable customers thereby preventing returns, reducing costs and increasing margins.

Playing For Keeps – keep stock sold over the peak trading period

 

Keeping stock sold – avoiding returns the key to retail profits

The sales figures over the peak trading periods of Christmas and Black Friday may make the headlines, but those returns coming back over the next 28 days will cost retailers millions…and often get ignored.

It’s time to get the facts.

Playing for keeps…

Clear Returns new Playing For Keeps report offers the facts around returns on Black Friday, peak season and beyond. £160 million of Black Friday stock is set to be returned, stock that will then be unavailable to sell during the most critical trading period of the year…Christmas.

Playing For Keeps is more important than ever as it is not really a sale until the customer decides to keep it. Returns kill retail profits and Clear Returns presents the facts that the wider retail business simply cannot afford to ignore:

 

Clear Returns can help retailers regain an extra £1 million for every £10 million returned, statistics which make Clear Returns one of Europe’s  top tech scale-ups according to The Telegraph.

Expert insight…

Clear Returns CEO, Vicky Brock, explains why Black Friday could end up being a short term gain but long term loss for many retailers:-

“Forget the headline-grabbing figures of what analysts say people are going to spend on Black Friday. That’s just the beginning. The real concern is that the event could end up costing retailers money rather than boosting their profits.”

“This is because the spike in sales from November 27 will be followed, for many businesses, by an increase in returns – and profit is only generated when customers decide to keep their purchases. On average, 14 per cent of all consumer electronic sales are sent back, and in the build-up to Christmas in particular, this can cause all manner of logistical headaches and lost margins.”

Talk to Clear Returns now to help your customers keep more of what they buy – and keep buying.

The future of retail and the returns that come from it

boxIn the rush to give shoppers what they want, when they want, and on whatever device, retailers have flocked to omnichannel offers and tempting promotions. But those offers will only cost them lost profits and lost future customers without investment in non-sexy back-end systems and logistics processes.

This past Christmas and peak sales period, many retailers were unable to deliver on the fundamentals of meeting customer promises – stock available to buy and timely order delivery. Retailers have been over-promising, especially when selling through their omnichannel networks, which has created a nasty feedback loop that exacerbated existing changes in customer behavior and exposed underlying weakness in back-end and logistics systems.

It’s no secret that the recent Christmas shopping chaos backlogged many retailers who didn’t invest in their back-end systems and was one of the reasons parcel delivery company, City Link, went bust. The backlog happened for a few reasons – the massive discounts in the lead up to Christmas kicked in earlier, continued longer and shifted January trading into the peak Christmas trading period. Also, a surge in early online purchases took product out of stock, much of which was later destined to come back as returns (in some categories e-commerce returns rates will have come close to 50 per cent).

With the ‘new shopping’ – major advancements in e-commerce and m-commerce selling that make a customer’s buying experience as convenient as possible – the future of retail is certainly here. Retailers want to offer their customers everything from click and collect services and free same-day shipping to lenient return policies, but without a proper strategy on how to meet these offers they are prone to disappointing customers and losing money from returned products that would have otherwise been kept.

Vicky Brock, chief executive of Clear Returns, said that ‘back-end tech and systems integration are not sexy and they don’t win shiny awards or get much PR, but they do allow businesses to survive, compete and thrive. If there’s a failure anywhere in the process it’s a failure of the retailer’.

Usually after customers receive their delayed products weeks after the holidays ‘they return them’, Brock said. ‘This year, that New Year returns spike happened during Christmas trading, which had an impact right across the supply chain and onto the shop floor, and it contibured longer due to those process failures. The thing a lot of people forget about is the impact of returned products on profits, and waiting weeks for a pair of boots to arrive in the mail only gives the customer time to reconsider their purchase or to find another pair of boots that they like better’.

As much as delays in delivery kept customers waiting in the lead up to Christmas, it also lead to a pile up of unprocessed returns, with little time to repackage them and get them back out on the shelves for consumers to buy. Next year we can expect that more emphasis will be put on the prediction and processing of returns, so that they don’t sit on a warehouse shelf decaying and losing value. Clear Returns helps retailers identify what will return and when, which will be information needed to avoid these customer experience and profit killing issues next year.

Clear Returns offer the solution to your return problems. Why not get in touch?

Contact Us HERE

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Email: info@clearreturns.com
Phone: 01415544175

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Why retailers should wait for returns data before celebrating Black Friday

Many UK retailers said that Black Friday was a big success with Amazon UK selling 64 items per second on the day and consequently ‘winning’ Black Friday. But is the celebration of what seems like a huge surge in profits for retailers premature?

‘Despite all the fighting in the isles on Black Friday and Cyber Monday, it’s way too early to determine the winner of this match’, said Vicky Brock, CEO of retail returns company Clear Returns. ‘Until the returns data comes in over the coming weeks–and return rates could be as high as 50 per cent–it’s too early to tell who’s “won” these big sales days’.

Visa estimated that £360, 000 would be spent per minute in online stores on Friday, but after Clear Returns’ analysis, it could be that the fuss of big discount days placed right before Christmas might not be worth it for retailers.

The problem is in the way the discounts on these days are set up that make products especially likely to be brought back.

‘All the preconditions necessary to drive up returns are in place’, said Brock. ‘You have a time sensitive offer placed alongside a sense of scarcity and panic, which appeals to over-buyers who make their selection at home post-purchase and panic buyers who get caught up in the emotion of the frenzy and will likely later return the products they did not mean to buy in the first place’.

No respite will be offered by Cyber Monday as shoppers take to their favorite online stores and scroll through for discounts on their favorite electronics, avoiding the city center crowds. Online stores typically have a far higher returns rate and a higher cost of servicing returns than physical stores.

It has been estimated that around £650m was spent online on Cyber Monday. But one-third of online sales on any ordinary shopping day are returned, so imagine the difficulty online stores could face when you take the formula of big business sales days and combine it with online buys.

Retail Week recently estimated that 600, 000 unwanted presents bought on Black Friday and Cyber Monday will be returned by shoppers after Christmas. Post-Christmas returns are a huge loss for retailers, but at least it is an expected one What is not expected are the exceptional levels of hype-driven returns that will be flowing in during the days prior to this peak trading period.

Clear Returns says that we need to not only focus on post-Christmas returns because the timing of post-Black Friday and Cyber Monday returns us also seriously problematic for retailers who are busy fulfilling production during the days leading up to Christmas.

‘I do think we’re going to see peaks in returns just before Christmas and profits will tumble as a result, especially since returns are rarely treated as a priority. Returns are the things that often get tackled only after the warehouse has dealt with outbound fulfillment, meaning that those pre-Christmas returns are just going to sit there. There will be nowhere for the returned stock to go except into January sales or clearance channels’.

Once the costs of returns have been subtracted from the products sold on Black Friday and Cyber Monday, there may be some retailers who are putting away the celebratory champagne and really reassessing the effectiveness of it all.

Posted by Lisa Monozlai