Black Friday Costs UK Retailers £180m in Returns

Author: Amanda Mulquiney

Our very own Mark Thornton was mentioned in The Telegraph last week supporting Vicky Brock's (CEO, Clear Returns) opinion that "whilst Black Friday is deemed to be a successful key trading day...It’s a gloomier picture once returns are factored in." According to Experian-IMRG, UK retailers could incur costs of 180m from consumers returning goods bought during the 24-hour Black Friday sale.

With as much as 40% of all goods ordered online being returned. This begs the question, should UK retailers get involved in Black Friday / Cyber Monday?

 

For or Against Black Friday?

Opinions are divided when it comes to taking part in Black Friday. Those who are against it are sticking to the argument that it’s not within the industry’s interest to focus too much trade on one day alone.

John Lewis’ Andy Street warns that retailers should reconsider heavy discounting on Black Friday. Despite their success with Black Friday in 2014, with the biggest trading week on record with sales up 22%, profitability remains a big challenge.1 Instead, retailers should focus their attention on steady and continuous trade with the majority of their products at full price.

Whilst some retailers remain confident in the value of their brand. It’s worth briefly considering both sides of the argument.

 

Caption: Jigsaw remain confident in the value of their brand, and promote their pricing manifesto: Reduced by Nothing; Standing ­for Something.

 

Why Take Part in Black Friday?

It’s hard to ignore such a major event within the retail sector. Clearly, consumers love the US-inspired campaign - and with £810m spent online throughout the Black Friday period last year, why take the risk by disappointing your valued customers?

What’s more in 2015, it’s predicted that Black Friday is going to be a £1.07Bn trading day, this would be the first time that online sales in the UK surpass £1Bn in a single day.

So why wouldn’t you take part, and get your piece of the promotional pie? 3

 

Why hold back?

Two Thirds of Potential Shoppers Hold Back on Christmas Purchases

According to recent research from eDigital, 64% of potential shoppers are holding back on Christmas purchases in the hope that they’ll bag a bargain on Black Friday.

Research suggests that Black Friday is becoming detrimental to sales not only in the months and weeks leading up to the big day, but also on the Christmas trading period?

Heavy discounting comes at a price – Sales may increase, but if consumers aren’t spending more overall, discounts will have a negative impact on margin and profitability.

 

For many retailers the demand can prove too much.

Argos is one of many examples where retailers haven’t been able to maintain performance under the strain of such peak loads. In fact, Argos’ site went down on the first day of their Black Friday sales. They suffered from downtime, slow page loads and irritating queue systems – all of which do nothing to amaze or delight customers.

 

The Impact of Returns on Profitability

UK retailers stand to lose £130m just from handling returns of items bought on Black Friday, according to the retail intelligence company Clear Returns. Costs related to lost margins, cleaning and storing, oversupply of stock and the lost value of future custom from the shopper add a further £50m to the returns bill.1

Vicky Brock, Founder and Chief Executive of Clear Returns makes the point that retailers need to bear in mind is that a sale is only when a customer decides to keep an item – and the promise of a Black Friday deal alone might not secure this sale. "While on the surface, Black Friday is deemed to be a successful key trading day, but it’s a gloomier picture once returns are factored in."1

Phil Smith, Nationwide’s Head of Current Accounts stated that, half of shoppers confessed to making impulse purchases on the day to secure a bargain, “but in the cold light of day many realised it’s not quite the bargain they thought and ended up taking the goods back.”1

Between 25pc and 40pc of all goods ordered online in the UK are returned, according to industry figures. By mid-December, it’s thought that £600m worth of stock bought between Black Friday and early December will be tied up in the returns system, preventing retailers from selling the items during the crucial sales season.

"Now a major discounting event, Black Friday's 'buy now or miss out on a deal' premise serves to send customers into frenzied spur of the moment shopping behaviours," said Mark Thornton, Director at Omnichannel IT software company, Maginus. "This need to act now incentivises impulse purchases, which often are just returned by customers at a later date, eroding retailers' already squeezed margins further during the peak trading Christmas period.”1

 

Opinions remain divided as to whether or not Black Friday / Cyber Monday is a positive addition to the retail industry’s marketing calendar. The momentum behind the Black Friday Phenomenon may be too strong that it may be hard to avoid. And if you do, what will the impact be if your closest competitors don’t hold back?

One thing’s for sure - You need to plan ahead and ensure your IT solutions can perform under the heaviest of loads in order to deliver on your promises.

 

Click here to read the original article, "Black Friday costs UK retailers 180m in returned goods".

Read More

  1. Black Friday costs UK retailers 180m in returned goods, The Telegraph
  2. John Lewis boss warns of Black Friday Retail Frenzy, BBC 
  3. £1bn to be spent by UK online shoppers this Black Friday, IMRG 
  4. Two Thirds of Black Friday Shoppers Holding Back on Planned Purchases for the Big Day