BLACK FRIDAY is still regarded by the UK with a degree of wariness, sense of novelty and confusion. Its name suggests the solemn remembrance of a historically significant atrocity, while its first appearance on the British retail landscape in 2014 provoked scenes of greed as adults brawled over cut-price espresso machines.
For finance directors and CFOs, Black Friday is a day that presents a slew of issues, some of which can ultimately hurt the third quarter’s bottom line and – by extension – go some way toward explaining why major retailers scaled back their participation. Chief among them is the impact on stock of a “scarcity mindset” in customers, which encourages speculative purchasing habits.
The very nature of it makes returns go through the roof,” explains Vicky Brock, CEO of retail technology firm Clear Returns. “We already know the scarcity mindset – especially online – causes shoppers to buy now and choose later, so instead of making a selective choice in-store limited to what they can carry, they will make a speculative purchase: buying what’s available to them and once it’s delivered, they’ll make their decision on what they’re going to keep.”
That, Brock explains, means “a hell of a lot more” stock goes out at a far greater cost to retailers than will be retained by customers. In fashion, for example, this has led to return rates online of between 30% and 35%, Brock says. A typical women’s fashion store on the high street will see return rates of about 5%. 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.
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