Retailers divided over Black Friday: a third saying it’s unprofitable and unsustainable, LCP Consulting finds

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Black Friday has divided the retail industry – with a third of major retailers saying it is unprofitable and unsustainable, with those retailers without the infrastructure and capabilities to deliver on their customer promise running the risk of alienating customers and harming long-term sales.

These findings are published today in a new LCP Consulting report – The Omni-channel Journey. The report also found that major retailers with an established omni-channel capability are poised to capitalise on the huge sales potential presented by Black Friday, set to break the £1bn mark for the first time this month. These retailers were also able to measure the true cost of Black Friday in 2014, leaving them in a position of strength with agile, customer driven business models, better able to respond to the high level of customer expectations around this peak trading time.

The report is the third in a series from the leading retail supply chain consultancy which interviewed over 100 leading retailers in the UK and US, in addition to a number of senior retail executives from leading European retailers.

The report includes interviews with an LCP panel, consisting of leading European-based retail experts including: Graham Barnes (Supply Director, Argos), David Wild (CEO, Domino’s Pizza Group), Dino Rocos (Operations Director, John Lewis Partnership), Neil Ashworth (CEO, Collect+) and Klaus Hellmich at GALERIA Kaufhoff.

Commenting on the report findings, Graham Barnes, supply director, Argos, said: “The transition is hard to do. Prioritising customer experiences over real back-end fundamental capability means that you may promise customer experiences that you can’t live up to. In our world, for example, the way we have chosen to go after omni-channel fulfilment means that you’ve got to have really good stock visibility, accuracy, and infrastructure which you can’t just put up overnight.”

Five additional retail industry insights emerge from this year’s report:

  • Omni-channel journey is longer and more complex than retailers first thought

Twice as many retailers compared to 2014 are still in transition to omni-channel, recognising a longer journey. In 2015, retailers are realising that the omni-channel journey will take longer than anticipated. It’s more complex and fundamentally about the whole business, not just sales.

  • Tangible business benefits are now becoming evident to omni-channel adopters

Retailers are experiencing significant benefits in three areas as they move to an omni-channel model: financial performance, operational performance and customer service. Omni-channel Pioneers[1] are twice as likely to report double-digit growth.

  • Rapidly changing customer expectations mean customers must be placed at the heart of retail

Delighting customers is overwhelmingly acknowledged as the way to drive profitability. Customer delight gets the most emphasis from Pioneers and Followers[2] who are better positioned to respond to customer expectations and demands.

  • Intelligent partnerships and cross functional working are key to success

If retailers are to deliver on challenges such as same-day delivery and demand spikes such as Black Friday, then working effectively with partners is key. Siloed thinking isn’t going to work. Internally success lies in full organisational integration and collaboration – with the customer at the centre. Externally, it’s critical that omni-channel retailers develop close working alliances with the right organisations.

  • It’s more important than ever to plan for an uncertain future

It’s clear that the retail landscape continues to change at a pace and those who lack the agility to respond are likely to fail. Pioneers and Followers are increasingly thinking in a more omni-channel manner and the distance between them and the rest of the field is growing as customers continue to demand ever higher levels of service. How the industry anticipates and reacts to future developments will be the key challenge for the year head.

Stuart Higgins, Retail Partner at LCP Consulting, said: “The Retail industry continues to be in flux as it adjusts to the demands of digital commerce and the resurgence of the empowered customer. Omni-channel business models are enabling the winners to drive significant sales and profit growth but those who have not yet embarked on the journey face an uncertain future in the face of growing service expectations.”