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Beyond Black Friday: New Challenges for Holiday Retailers

This year's Black Friday and Cyber Monday were bigger than ever. But the numbers could be concealing an underlying trend away from those key dates in the retail calendar.

While Black Friday in-store sales figures were reported to be down by 5 percent this year, online sales hit a new record of $3.34bn. Three days later, Cyber Monday topped that number with $3.45bn in online activity.

Shoppers were drawn by the usual flurry of discounting on select merchandise. For retailers, however, the results were mixed. According to the National Retail Federation, average spending per person over the Thanksgiving weekend was down slightly from 2015, to $289.19 from $299.60. A third of shoppers bought only items that were on sale, behavior that could cut into retailers’ profit margins for the season.

Longer term, a new consumer survey by JDA Software Group Inc. suggests that Black Friday, on which retailers have come to depend for a hefty percentage of annual sales, will begin to fade in importance. Forty-seven percent of respondents said they planned to skip Black Friday or Cyber Monday this year. Fully 73 percent said they preferred to do their holiday shopping outside of the holiday season.

They’ve been given numerous opportunities to do so, most notably Amazon.com Inc.’s Prime Day, which occurs at mid-year. Brick-and-mortar giants such as Wal-Mart Stores Inc. and Target Corp. have responded with their own off-season discounts. If such events haven’t killed Black Friday’s appeal, they’ve managed to inflict injuries that are likely to grow more serious in years to come.

The holiday shopping season seems to start earlier each year, with Christmas merchandise showing up on store shelves before Halloween. By the time Black Friday rolls around, at least some shoppers have already begun filling their gift lists. There’s less of a rush for the doors at 5 a.m. on the day after Thanksgiving. Meanwhile, online bargains tempt buyers to complete purchases weeks before the stores start playing Christmas carols. “You get pricing now that’s as competitive [as Black Friday] much earlier in the season,” says Jim Prewitt, vice president of retail industry strategy with JDA.

Brick-and-mortar retailers are battling the Amazon juggernaut by offering consumers a range of choices for ordering and receiving merchandise. According to the JDA survey, 46 percent of consumers used the BOPIS option — that’s short for Buy Online, Pick Up in Store — in the last 12 months. That’s a 33-percent increase from the previous 12-month period.

It hasn’t been a smooth transition. Retailers are still configuring their warehouses, backrooms and store shelves to accommodate BOPIS. Last year, 40 percent of consumers experienced a problem with the service, although that was a 15-percent improvement over the prior year.

What went wrong? Prewitt says stores lacked the staff and dedicated locations to manage the complex process, resulting in long lines for pickup. In a number of cases, promised items weren’t available in store. (The use of lockers for picking up online orders is still in its infancy.)

Then there’s BORIS, for Buy Online, Return in Store. Only 20 percent of respondents to the JDA survey said they had utilized a BORIS service in the last 12 months, but 67 percent said they would prefer to return online purchases to a store. It beats boxing up the item and lugging it to the post office or parcel-shipping service. Retailers, for their part, like the practice because it brings consumers back into the store and raises the possibility that they’ll buy more stuff while there. Expect BORIS to play a bigger role in online commerce in the months ahead, Prewitt says.

A finding of the JDA survey that will surprise no one is the consumer’s continuing and insatiable appetite for free shipping. One in four sees the lack of that amenity as a deal-breaker, and will not shop on sites that fail to offer it.

What constitutes “free” is another question entirely. Many online merchandisers set spending thresholds or offer annual memberships, such as Amazon’s Prime program, which maintain more liberal policies on free shipping. But Prewitt says consumers are quickly moving toward the expectation “that free shipping means free shipping.” Target and Best Buy, for example, are offering a no-strings policy that includes no minimum purchase level.

“Some retailers are recognizing that this is becoming foundational,” says Prewitt, while adding that the perk will continue to depend on the size and value of the item in question.

All of this means that retailers must do a better job of managing inventories. They need to achieve real-time visibility of items in production, within the warehouse, in transit and on store shelves. In some cases, they’ll have to position product closer to the stores in order to respond more quickly to demand.

The challenge lies in balancing the expense of acquiring that capability with the need to keep costs down. Consumers continue to place a premium on price, Prewitt says, even as that insistence squeezes retailers’ margins. As the battle between e-commerce and in-store sellers continues to rage, traditional merchandisers could find themselves pining for the days of door-busting Black Friday.

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