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A Very British Black Friday: The Real Winners and Losers

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Black Friday is perceived as a frantic one-day sale, when shoppers lose control in the fight for bargains and retailers move mountains of stock to get a good chunk of Christmas sales in the bag.

This study on Black Friday in Britain shows that the reality is somewhat different. While there will always be a small proportion of shoppers willing to fight for a bargain, the majority are sensible human beings happily buying online, at home.

The losers are the retailers. Black Friday discounts drive shoppers to open their wallets earlier, but not necessarily deeper, so the idea that they are a major boost to UK Christmas spending is flawed.

Find out about our predictions for the future of Black Friday in Britain, and our recommendations for what retailers should really be focusing on.

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A Very British Black Friday: The Real Winners and Losers

  1. 1. NOVEMBER 2015 A Very British Black Friday T H E R E A L W I N N E R S A N D L O S E R S
  2. 2. 01 / A VERY BRITISH BLACK FRIDAY The real winners and losers EXECUTIVE Summary Black Friday is perceived as a frantic one- day sale, when shoppers lose control in the fight for bargains and retailers move mountains of stock as they get a good chunk of Christmas sales in the bag. This study, looking specifically at Black Friday in Britain, shows that the reality is somewhat different. There will always be a small proportion of shoppers who get a kick out of grabbing a bargain, no matter how hostile the experience, but the majority are sensible human beings who are in control and able to make their own decisions. Moreover, they are happily buying online, at home. The losers are the retailers. Black Friday discounts drive shoppers to open their wallets earlier, not deeper, so the idea that they are a major boost to UK Christmas spending is flawed. Given that price reductions also erode brand equity, the commercial case for retailers to participate is weak. So who wins? Everything points to the multi-brand online discounters, specifically Amazon. It was Amazon who introduced Black Friday to the UK five years ago and, this year, 84%1 of shoppers say they will do their Black Friday shopping with the online giant. It is no wonder a backlash has begun, with a small number of retailers opting out of Black Friday and using the opportunity to tell a positive brand story. We predict that Britain’s Black Friday will become the domain of the discount retailers and turn into just another discounting day in the run-up to Christmas. We see more fabricated shopping days arriving on our calendars, too. There is an opportunity here for a brand to create a more positive day that is not based on cheaper pricing and which offers a unique experience that is true to the brand. For example, imagine someone like Primark launching a fun and frivolous shopping day on 1 April next year. The long-term winners will be the brands offering a continuous experience online and in-store. Shoppers are spending more time online, making decisions and narrowing down their choices before buying in-store. This growing trend of ‘webrooming’ means that brands need to expand access to information online, while creating rewarding and unique physical experiences in-store. However, it does require a major shift in mindset for retailers: from selling to helping people buy. Contents – 1.0 SHOPPER BEHAVIOUR p.02 2.0 THE BUSINESS CASE p.03 3.0 DEFINING THE FUTURE p.04 APPENDIX p.05 More slippers and tea cups than supermarket punch-ups. Heavy discounts steal Christmas sales. Who wins in Black Fridays to come?
  3. 3. 02 / A VERY BRITISH BLACK FRIDAY The real winners and losers SECTION 1.0 Shopper Behaviour Here is the reality: the majority of shoppers in Britain embarking upon Black Friday will be in their dressing gown, holding a cup of tea. No queues, no hassle and no stress. The only discomfort they are likely to experience is forgetting their slippers as they settle down at their computer on a slightly chilly November morning. A Retail Week poll of shoppers who made a purchase on Black Friday 2014 revealed that 58% did so via a computer at home, while 29% used a mobile device and opted for home delivery. Scaremongering stories of shoppers wrestling in the aisles and police being called serve only to remind the great British shopper of what they should do their best to avoid. The truth is, Black Friday is a positive experience for shoppers. The same poll also showed that 96% of shoppers who bought on Black Friday were either very or quite satisfied. Not exactly shopping pandemonium2. While most Black Friday bargains are available online, there are plenty of in-store-only deals to be had. These loss leaders are used to drive awareness and traffic: 34%3 of Black Friday shoppers visited a physical store last year. So what is it that drives these individuals to take on the much-hyped Retail Armageddon? Björk makes an interesting case in her song Human Behaviour: If you ever get close to a human And human behaviour Be ready, be ready to get confused There’s definitely, definitely, definitely no logic To human behaviour But yet so, yet so irresistible And there’s no map And a compass Wouldn’t help at all The lyrics make a simple point: that we cannot rely on rational, logical ideas to anticipate human behaviour. To get under the skin of people and understand how and why people shop, we need to understand their shopping mindstates. We know that 75%4 of Black Friday shoppers start the day with a strategy. They have already been dreaming and exploring online (cf FITCH paper on The Joy of Shopping), they know what they want and they have located it. Now it is time to buy it. For the majority this is online but, as we know, one-third of shoppers still go to a store. The keenest queue up in the cold, waiting for the doors to open; for the rest it’s the battle to get there before stocks run dry. This behaviour is FOMO, the fear of missing out. This acronym was coined a couple of years ago to describe a psychological disorder caused by the onward march of technology, but its use is certainly appropriate for bargain shopping within a time-limit. Black Friday originates from the US and has evolved from bargain shopping to a major lifestyle event. Now that many retailers open up on Thanksgiving Day, the appeal of Black Friday as a day for deals appears to be waning. However, the appeal of spending the day with family and good friends is alive and well, from families in matching outfits to special breakfasts and sleepovers the night before. It is more about tradition than transactions over there. The introduction by Amazon of Prime Day5 in July this year indicates that the world’s biggest e-tailer is trying to stay one step ahead. Over in China, of course, there’s an example that dwarfs the lot. Homegrown online retailer Alibaba has been making billions since 2009 by turning an unofficial holiday called Singles’ Day into the biggest online shopping day of the year6. As Alibaba eyes international expansion7, we could see yet another discount day being added to our calendars. Amazon only introduced Black Friday to China in 2014, so it’s still too early to tell how this new ‘holiday’ will catch on. What is clear, though, is that there’s room for more retailers to get in on the action, since growth in retail sales for most Asian nations is projected to be higher than the global average8. So, Black Friday is a fabricated discount day in the UK and certainly no holiday unless the Queen decrees it. Clearly it is not for everyone. 1.1 STORM IN A TEA CUP 1.2 FOMO AFFECTS THE FEW 1.3 NOT FOR EVERYONE PURCHASE POINTS SHOPPER SATISFACTION Via computer at home Via mobile device Very or quite 58% 29% 96% SHOPPER MINDSTATES 34% of shoppers visited a physical store on Black Friday DREAMING EXPLORING LOCATING SHOPPING GUIDE
  4. 4. 03 / A VERY BRITISH BLACK FRIDAY The real winners and losers SECTION 2.0 The Business Case 2.1 BLACK FRIDAY STEALS CHRISTMAS SALES 2.2 EROSION OF BRAND EQUITY 2.3 THE BACKLASH Yes, there are signs of a potential backlash. The most interesting example is from America, where REI outdoor stores are shutting their doors and giving staff the time off. They recognise the importance of keeping staff happy in creating long-term sustainable advantage. The Harvard Service-Profit Chain (Diagram 2) is based upon this premise. Their empirical evidence proves that happy employees bring happy customers who in turn bring more profit. REI embraces this with messages such as, “Get outside and enjoy the day.” Ocado chairman Lord Stuart Rose described Black Friday as an “extremely bad idea”. He said that a number of retailers have now decided that “their margins have not improved, they’ve been eroded. They’ve gotten themselves in a hole that they’ve got to get themselves out of this year”18. We believe the smarter, bolder brands will abstain. Black Friday sales are predicted to reach £1 billion in the UK this year, up from £810 million in 2014. So surely it must be good news for retailers? Actually no. Black Friday discounts drive shoppers to spend earlier rather than to spend more. In the UK, £1 in every £3 of transactions is conducted through Visa’s payment system. Their data from last year shows that while overall spending increased by 2.1%last November compared with the same month a year previously, in the December it rose by just 1%. And on a month-by- month measure, it gained by 1.7%in November but then fell by 2.8%9 in December. Black Friday is robbing Peter to pay Paul. John Lewis consumer electronics sales last Christmas (Diagram 1)10 illustrate the point. Black Friday activity increased sales at the expense of Christmas sales. Despite Argos’s Black Friday shopping frenzy in 2014, which led to a 45% surge in sales, there was a sharp drop-off in demand in the following weeks. Like-for-like sales grew just 0.1%, compared with the estimated 2%in the 18 weeks to 3 January. As a direct result of Black Friday discounting, Argos missed its sales forecasts and recorded reduced profits. Homebase sales for the 2014 Christmas period were up only 0.6%, despite heavy Black Friday promotion. Its shares fell 7% at this news11. Marks & Spencer clothing and homeware sales were down 5.8%12 in the Christmas period of 2014, and there were similar stories amongst the supermarkets: Sainsbury’s sales for this period were down 1.7%13, Tesco’s were down 0.3%14. Asda’s were down 2.6%15, so not a great surprise when the supermarket chain announced in mid-November that it would not participate16. Marks & Spencer CEO Marc Bolland blamed Black Friday discounting for much of the drop in sales. Mothercare, by contrast, held out against the Black Friday frenzy. JOHN LEWIS CEO ANDY STREET “It is not in the industry’s interest to continue to grow the pace of Black Friday at the expense of other weeks… You want more steady trade and obviously you want more of it at full price…” Average weekly sales for year 14.7% down in the last 2 weeks 6.8% rise on electrical 41% rise during Black Friday week WEEK 1 WEEK 2 WEEK 3 WEEK 4 WEEK 5 XMAS BLACK FRIDAY STEALS CHRISTMAS SALES PRIMARK CEO GEORGE WESTON “Black Friday in the UK is pointless… It seems to have arrived online and although we did not run promotions last year, we saw a lot of people on high streets... But all it seemed to do was bring forward sales, so the week of Black Friday was good and the following week was bad and if you average them together sales were fine…” MOTHERCARE CEO MARK NEWTON-JONES “If you discount, you are doing that for people who are going to shop anyway. Black Friday was really hyped up this year but I think it is going to be muted next year. People will look at their figures and see they sold product at a discount that they could have sold at full price. We got the footfall and we didn’t discount: we grew sales and margin.” Heavy discounting, unpleasant retail experiences, disappointment, late fulfilment and high returns are a perfect storm for erosion of brand equity. Last year, on Black Friday, Curry’s PC World experienced web traffic that increased fivefold from 2013. At midday, customers queued for up to an hour, listening to the message, “We’re really sorry that the huge demand for our deals means you’re having to wait.” At Tesco, deals went live at midnight but the website was down for several hours. For M&S, delivery times had to double. Oasis’s Black Friday 2014 resulted in a 50%17 return rate from all orders. So the commercial case is weak for retailers, the experience can be poor for shoppers and brand equity is likely to be eroded. Surely there must be a backlash? SERVICE ADDED VALUE PROFIT AND GROWTH EMPLOYEE SATISFACTION CUSTOMER SATISFACTION DIAGRAM 1 THE HARVARD SERVICE-PROFIT CHAIN DIAGRAM 2
  5. 5. 3.1 BLACK FRIDAY WILL BECOME THE DOMAIN OF DISCOUNTERS 3.2 MORE FABRICATED HOLIDAYS WILL BE CREATED 3.3 WINNING RETAILERS WILL OFFER A CONTINUOUS EXPERIENCE We predict The British Black Friday will become purely the territory of retail discounters. It will turn into yet another cut- price period in the run-up to Christmas. Black Friday online will grow and spread. Last year, Cyber Monday appeared and this year, it looks as if some online retailers are extending Black Friday even further into weeks. The trend for artificial shopping holidays will continue. As an example, Amazon introduced the Amazon Prime Day on 15 July this year. There is a strategic opportunity here for bolder brands and retailers to get out of Black Friday type discounting days and take control, offering a unique shopping day that is a positive fit with the brand – for example, the idea mentioned earlier of a playful Primark shopping day on 1 April. The shift from showrooming to webrooming is good news for those retailers who act upon it, ensuring a continuous experience between online and offline. Showrooming: Shoppers explore in-store to find exactly what they need, and then go home and buy it more cheaply online; 73% of shoppers have showroomed in the past six months. Webrooming: Shoppers research exactly what they need online, and then go into the store, fully armed with information, to buy there and then; 88% have engaged in webrooming – an emerging trend that benefits brick-and-mortar retailers19. The long-term winners will be the brands that can offer a fluid and rewarding experience online and in-store. Success will require increased access to information online, together with a gratifying and unique physical experience in-store. It also requires a major shift in mindset: no longer are retailers selling, but they are helping people buy. SHOWROOMING Shoppers explore in-store to find exactly what they need, and then go home and buy it more cheaply online. VIVID TURNS DIY INTO “DO-IT-WITH- ME” OUT OF STORE AND IN HOME – FITCH reinvented home renovation with VIVID Homes for B&Q in China online and in-store. Trained coaches guide from start to finish and a 4D simulator allows the new home to be experienced before work commences. www.fitch.com/work/vivid/ WEBROOMING Shoppers research exactly what they need online, and then go into the store, fully armed with information, to buy there and then. of shoppers in past 6 months. of shoppers have engaged in this trend. 73% 88% DELL’S TECHNOLOGY “PARK” INSPIRES CREATIVITY – At one of the world’s largest consumer electronics trade shows, FITCH designed immersive product zones for Dell where thousands of visitors could unwind, try new technologies and create video simulations, butterflies and music tracks. LEGO GIVES PEOPLE ROOM TO PLAY AND PURCHASE – LEGO brand retail stores stay true to the toy company’s founding philosophy ‘play well’. Sales increased 30% when we cleared away 25% of the merchandise to create more space to play. www.fitch.com/work/lego/ 04 / A VERY BRITISH BLACK FRIDAY The real winners and losers SECTION 3.0 Defining the future
  6. 6. 05 / A VERY BRITISH BLACK FRIDAY The real winners and losers Claire.Belzidsky@FITCH.com +44 (0) 20 7479 0471 fitch.com linkedin.com/company/fitch twitter.com/FITCHdesign slideshare.net/FITCH_design facebook.com/FITCHglobal About FITCH – Designing the future. FITCH transforms consumer experience and accelerates business success. We deliver seamless solutions by combining the physical, human and digital elements of a brand to create unique experience signatures. FITCH is a leading global retail and brand consultancy with an integrated offer of strategy, design and implementation, which enables us to deliver across all touchpoints. We do this for clients that include adidas, Carphone Warehouse, B&Q, Dell, Hamleys, Land Securities and Philips. FITCH is a WPP company (NYSE). www.FITCH.com FOR MORE INFORMATION PLEASE CONTACT 1 2 3 4 5 6 7 8 Microsoft & Retail Week report, Planning for peak: 2015 and beyond Microsoft & Retail Week report, Planning for peak: 2015 and beyond http://www.retailtimes.co.uk/bad-shopper -experiences-on-black-friday-and-cyber -monday-last-year-will-deter-shoppers-in -2015-blue-yonder-predicts/ http://money.cnn.com/2015/07/06 /news/companies/amazon-prime -day-black-friday/ http://www.marketwatch.com/story /alibabas-singles-day-bigger-than -black-friday-2014-11-10 http://www.forbes.com/sites/great speculations/2015/06/18/how-can -international-expansion-impact -alibabas-stock/ http://www.pwccn.com/home/eng/rc _outlook_201516.html http://www.businesswire.com/news/ home/20150921005268/en/Market-Track -Study-Shoppers-Jump-2015-Holiday#. VgAAk86BDlc SECTION 1.0 SECTION 0.0 9 10 11 12 13 14 15 16 17 18 http://www.telegraph.co.uk/finance/ newsbysector/retailandconsumer/11338423/ How-Black-Friday-is-changing-Christmas- spending.html http://www.theguardian.com/ business/2015/jan/05/john-lewis-boss- says-rein-in-black-friday http://www.theguardian.com /business/2015/jan/15/black-friday -argos-homebase-sales http://www.theguardian.com /business/2015/jan/08/marks-spencer -suffers-christmas-sale-slump http://www.telegraph.co.uk /finance/newsbysector/retailand consumer/11329530/Sainsburys -Christmas-sales-fall-for-first -time-in-a-decade.html http://www.bbc.co.uk/news /business-30712762 http://www.thisismoney.co.uk/money /news/article-2960176/Supermarket-price -war-hurts-Asda-Christmas-sales.html http://www.bbc.co.uk/news/ business-34774289 http://www.retail-week.com/sectors /fashion/-tech-and-ecomm-oasis-plans -to-scale-back-on-black-friday-this-year/ 5079154.article http://www.retail-week.com/sectors/home -and-diy/aocom-boss-john-roberts-black -friday-was-big-surprise-to-everyone /5071748.article SECTION 2.0 19 http://www.interactionsmarketing.com /news/webrooming-now-popular-among-88 -percent-of-shoppers/ SECTION 3.0 Appendix –

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