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FTI Consumer Industries Snapshot – Black Friday 2020

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Today’s snapshot captures the insights revealed so far about Black Friday trading and the key themes preoccupying retail peers and sector commentators in the U.K. – ahead of further clarity in January’s Christmas Trading updates.

Summary

Black Friday 2020; what is usually a high profile shopping event was notably absent in the press versus prior years. With non-essential shops closed in England, parts of Scotland and Northern Ireland – bar Click and Collect – the distinction of a Bricks and Mortar Black Friday versus a Cyber Monday became redundant. According to Barclaycard, two-thirds of transactions processed on Black Friday typically come from in-store, underscoring the anticipated hit to retailers this year. Expectations for Friday itself were for a “sedate affair” given November had already been “a month of Black Fridays” (The Sunday Times), as retailers staggered discounting and prepared well to manage increased online traffic, avoid overwhelmed warehouses and ensure smooth logistics operations – as well as to manage stock and boost festive spending.

In such extraordinary times, we asked ourselves how do retailers factor a pandemic and global lockdown into Black Friday discounting? PWC found that those in stricter, longer lockdowns were likely to spend more, although consumer interest in Black Friday was generally considerably lower this year. In addition, Rob Cameron, Chief Executive of Barclaycard Payments has predicted that retailers are in store for a “Black Wednesday” this week as certain high streets in tiers 1 & 2 reopen after lockdown 2.0.

This Black Friday fell just after payday and ahead of Christmas, significantly adding to the pressure on what has been called the Golden Quarter deeming it “make or break” for some. There were major casualties reported for some retailers on the day with Retail Week’s Luke Tugby tweeting, “[a] Black Friday in more ways than one as Arcadia heads for administration and Moss Bros reveal CVA plans.” This news-flow dominated many of the weekend business pages, with The Times describing the “bleak” Black Friday for high street retailers, as “lockdowns have dramatically escalated the crisis on the high street”.

The key themes around Black Friday included the dramatic shift to online spend; the financially stretched consumer; ethical activism via social media; the pressures of expectations for cheap and speedy product fulfilment; and the pitfalls of “too good to be true” scams, which all reflect longer running issues and trends. Accenture‘s global research found that consumers’ changing attitudes, behaviours and purchasing habits are likely to stay post-pandemic.

Over the past few years, we have seen many retailers discussing their Environmental Social Governance (ESG) commitments and how ‘giving back’ must be central to their business strategy and purpose. However, despite ESG being a real focus during the pandemic, especially regarding care for key workers and the wider community, it was not evident in the bulk of mainstream retailers’ Black Friday commentary. Potentially, the concern for operations during this vulnerable time overshadowed the emphasis on ESG. Instead, it was the smaller independents that stole the spotlight for using Black Friday as a moment to promote their approach to sustainability and community giving. Of note though, major supermarkets did demonstrate a collective effort in running their advertisements back-to-back on Friday evening with the hashtag #StandAgainstRacism, in response to racist comments that had been shared online about Sainsbury’s and Co-op’s Christmas advertisements (The Guardian).

 

What’s Driving Conversations?

As a consumer-focused event, the bulk of social media commentary has related to promotional deals, with the words “win”, “deals”, “free” and “giveaway” topping the volumes in our data analysis of online conversations about Black Friday, and sentiment overwhelmingly positive.

Nonetheless, several broader corporate themes have made it into these social media conversations, relating to:

  • demands to boycott online retailers;
  • avoiding scams;
  • a push for a “Green Friday”, which was mentioned almost 450 times, made more visible by the likes of the Bazaar UK account (516k followers) and the Ethical Brand Directory (3k followers). #BuyNothingDay has also proven a highly trending counterpoint to the consumption-focused bulk of conversations.

As yet, there has only been a handful of spokespeople from the larger retailers surrounding Black Friday (here). Of those that have provided comment, the majority veered towards simple references to their consumer deals, however this was followed closely by comments on the logistical challenges and opportunities posed by Black Friday, for stock management in particular – and gratitude to employees during this unique period.

 

Issues Management  

Operational capacity: The shift to online presented major operational challenges to brands, retailers, and couriers seeking to deliver their usual customer fulfilment standards. As reported by The Daily Telegraph last week, retailers were working hard to prepare for the online sales spike, referencing John Lewis shifting stock from its shops to warehouses. Meanwhile, the Royal Mail had already reported that parcel deliveries were exceeding letter post for the first time. On the day itself, The Daily Telegraph reported concerns that courier firms may not have capacity to service the speed and scale of fulfilment that retailers are promising their customers, referencing that 40% of consumers were “expecting both fast and free parcels this Christmas”. PWC’s research forecast that £750m of sales would go via Click and Collect, an important channel that could “help alleviate pressure on home delivery”.

Ignoring Black Friday: As in previous years, there have been several brands opting to participate less, or to entirely eschew the Black Friday concept. BBC News reported on a clutch of well-known high street retailers who have decided against participating in this year’s Black Friday sale – Next, M&S and Wilko – arguing that they instead better value all year round.

Community & Environmental Impact: Many independent brands commented that they would direct some Black Friday profits to charities; Danish performance-wear brand Rockay committed to offset all emissions generated by the shipping of Black Friday week products, and whilst last year AllBirds stopped selling on Black Friday, this year the Company has this year instead raised prices “to discourage impulse spending” and is donating to charity. Black Friday has again proved a challenge for retailers in balancing their customer-focused messaging regarding product value and speedy fulfilment with concerns for the people and environments in their supply chain, with particularly low-priced goods – including an 8 pence dress – highlighted in these debates (The Guardian).

Job creation and digital skills recruitment: At a time of considerable sensitivity for retail employees’ job prospects further to the furlough period, there has also been positivity regarding job creation in other segments of the sector. DPD will have hired 20,000 new workers across Europe; in July, Hermes said it would be adding 10,500 jobs in the UK, whilst DHL Express has hired more than 10,000 people globally, in preparation for an expected “more than 50pc increase in volumes” during the 2020 peak season, as reported by The Daily Telegraph. As covered in recent weeks by Drapers, this also accompanies an uptick in tech-focused retail roles, as “digital skills are in hot demand. One in seven UK retailers have created new digital roles”, and job creation has been announced in recent months from the likes of Amazon, Tesco, The Very Group and Morrisons.

Prioritising employee care:  A key operational and reputational issue for peak season this year is how to keep employees and customers safe, with store openings and pent up demand potentially creating footfall pressure in-store, and as noted by The Guardian, “mindful that a huge, late surge of ordering could overwhelm socially distanced warehouses and courier networks”. As is historically the case, Black Friday has also, as in previous years, been a day of vocal media activity from trade unions such as Unite and the GMB. Known for popularising Black Friday in the UK, Amazon is gifting its front-line employees working through December “special recognition bonuses”, in gratitude to their “teams who continue to play a vital role serving their communities” (Sky News). Marks and Spencer also used the opportunity to talk positively about their employees, opting out of Black Friday announcing that they would close operations on Boxing Day, reversing a prior decision, “so that our colleagues can enjoy more special time with their loved ones”, receiving positive responses across consumer and corporate outlets for the “incredible gesture” (Woman and Home, Evening Standard, Retail Gazette).

 

Striking Statistics

2/3: The proportion of UK shoppers who delayed a purchase to try to find a bargain in the Black Friday sale, according to research by Lloyds Bank. (BBC)

£7.5 billion: The amount shoppers were expected to spend this Black Friday; 12% lower than last year and the first time that spending has fallen since Black Friday’s arrival in Britain. High street retailers are forecast to have missed out on £3 billion of takings this Black Friday, in addition to the £2 billion that they have lost every week since shops were shut at the start of the month. Meanwhile, online spending is expected to surge to £5.8 billion, according to the Centre of Retail Research and Vouchercodes.co.uk. (The Times)

88%: The proportion of shopping that UK consumers were forecast to have conducted online this Black Friday, up from 77% in 2019. (PWC)

38%: The percentage of the UK population interested in Black Friday this year, albeit those interested were likely to spend more, “redirecting forced savings” and wanting to treat themselves. The decline was particularly acute amongst 18-25 year olds.(PWC)

30%: The year on year rise in volume of retailers offering early Black Friday deals, according to Lovethesales.com. (Drapers)

58%: The year on year rise in online sales for the second week of November, according to internet industry research body IMRG, with online sales for Black Friday week expected to be 35% to 45% higher YoY. Of the 320 retailers monitored by IMRG, almost 30% were running offers in the middle of last week, compared with about 11% in 2019. (The Observer)

120 million: The number of parcels to be dispatched from online orders this week, according to IMRG. (The Daily Telegraph)

 

Quick Quotes

Kelly Askew, Managing Director UK/Ireland Retail Strategy, Accenture: “The inflection point comes around whether retailers are going to make the promises that the courier companies can’t deliver on. It’s going to be a struggle. A few of the courier companies have already come out and said to their customers that their capacity is 100pc spoken for.” (The Daily Telegraph)

Rob Cameron, Chief Executive, Barclaycard Payments: “In a typical year, about two-thirds of the transactions we process on Black Friday come from in-store sales with the rest coming from online…We predict that Wednesday, December 2 – the end of the national lockdown in England – will see a surge of shoppers heading back to the high street to hunt for bargains in-store with transactions likely surpassing what we’re seeing today. As a result, the milestone that retailers should start focusing on is not Black Friday but Black Wednesday.” (Retail Week)

Kyle Monk, Head of Insight and Analytics, British Retail Consortium: “This Black Friday has the potential to be the biggest yet, sitting one week closer to Christmas and coming just after pay day for a lot of people…Nonetheless, it poses a dilemma for retailers this year, who must weigh up whether significantly reduced margins are worth the additional volume when deciding on the discounts they will offer, particularly given that stores are closed this year and that online performance this golden quarter might be make or break for some.”

Oli Townsend, Deals Expert, Money Saving Expert: “Black Friday is very profitable for retailers and the hype around it gets people buying, so it’s no surprise in this tough year for retailers that we’ve seen many milking it. If retailers continue to struggle and aren’t selling as much as they’d like, there’s a good chance we’ll see more promotions and stronger discounts throughout December — so waiting can sometimes be worth it.” (The Sunday Times)

Richard Lim, Chief Executive, Retail Economics: “I think people are well aware that this Christmas is going to be completely different…They are not going to be able to go to their local town centre or shopping mall and have the same pleasant experience as they had last year.” (The Guardian).

 

The views expressed in this article are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.
©2021 FTI Consulting, Inc. All rights reserved. www.fticonsulting.com

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