Retail consultants sound caution over UK Black Friday promotions

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Leading retail consultants have warned Black Friday (25 November 2011), traditionally the beginning of the Christmas shopping season in the US, does not translate so readily to the UK and retailers are taking a gamble if they slash prices too early.

Emmanuel Hembert, principal at global management consultants, AT Kearney, said: “This year, Amazon is once again offering its customers a whole week of Black Friday promotions.Together with Gap, which has announced a Black Friday sale in its stores, it is among the handful of American retailers trying to promote the Black Friday concept in the UK. 

“However, this quintessentially American shopping holiday is a long way from becoming as popular in the UK as it is across the Atlantic,” he said.

Tristan Rogers, CEO at retailer advisor, ConcretePlatform.com, called for caution: “With the lead up to an event like Christmas, all the high street retailers start watching each other like hawks, waiting to see who makes the first move. 

“In this case, the move in question is the big discount weekend, which marks the start of the run up to Christmas. The issue is when the retailer commits to the price slash, they will be losing margin on product; so the gamble is they make up for margin erosion in quantity and churn, therefore clearing the floors for new product. 

“The first mover gets the advantage, as they hopefully benefit from the pent up demand for a good discount. However, bolt early, and the pent up demand is not quite there and you end up discounting for no big turnover advantage. Secondly, such is the paranoia of the high street, once one retailer starts, the rest follow. If the dynamic was applied in reverse, it could be seen as price fixing.

“The US and UK high street markets are so poor at the moment retailers are looking at these rallies as a means of defibrillating the moribund market into life,” said Rogers. “The more reliant they are on the one market, the more stunts like this they need to pull. It’s a downward spiral.”

Hembert highlighted other Christmas promotions already in full swing at UK retailers. Debenhams launched a 40% Christmas Spectacular on 14 November 2011, a move followed by BHS on 17 November 2011; while Argos, the Early Learning Centre, Oasis, Dorothy Perkins, Coast, Boots, the House of Fraser are also offering savings between 20% and 60% on gift-list items, he said.

According to Hembert, Cyber Monday, set to take place on the 28 November 2011, is a more palpable phenomenon in the UK than Black Friday.

“However, it is still far from being a market-wide promotional event,” he said. “Mondays including 28 November and 5 December will be a crucial time for retailers as this is when consumers, having just received their last pay check before Christmas, have the most money available for Christmas shopping.” 

Hembert said online retailers will be well placed to reap a larger share of what UK consumers spend this Christmas and even more so if the severe weather conditions of 2009 and 2010 repeat themselves this year.  

IMRG figures forecast UK consumers will spend £7.75bn online in the five-week period before Christmas (up from £6.8bn spent in 2010), of which almost half (£3.72bn) will be spent in the first two weeks.

“As far as the general retail situation in the UK is concerned, the current market environment one man’s gain is another man’s loss, and much of the successes of online retailers will come at the expense of the high street,” said Hembert.

“UK consumers are seeing their real incomes squeezed due to pay freezes, growing unemployment and rising living costs, and will remain cautious with their spending in the months to come.”