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BizReport : Ecommerce archives : November 27, 2015

Is Black Friday a 'false economy' for retailers?

Black Friday may be built on a 'false economy', says Worldpay's Insight Services team, and could actually be detrimental to a retailer's remaining festive sales season.

by Helen Leggatt

With Black Friday sales in the U.K. bringing in around £2billion(US$3billion) in sales in shops and online, and 1 in 4 consumers heading out to make a purchase, it's hard for retailers to turn their backs on the opportunities the manic sales day offers.

However, WorldPay's Insights Services team has revealed, most Black Friday shoppers are attracted by the bargains but never return to the stores they visit on Black Friday to complete the rest of their festive shopping. Moreover, negative experiences appear to be turning away consumers, with one in five saying they think less of brands that take part in Black Friday.

Furthermore, according to WorldPay, "many Black Friday shoppers (40%) get carried away with self gifting - purchasing items for themselves and subsequently making an adjustment to their spending as a result". Their data shows that Black Friday shoppers decrease their overall spending in the weeks following Black Friday by about 10%.

The upshot is that, whilst Black Friday shoppers spend £114 (US$171) more in store and online over the Christmas period than those who give the day a miss, a far higher proportion of that spend goes on purchases at very low-margin - which could be bad news for retailers during the crucial pre-Christmas sales period.

"Black Friday has become a major event in the UK retail calendar, but retailers are walking a very fine line. It has been hugely successful inasmuch as it helps retailers offload old stock and clear the shelves and warehouses in time to replenish for Christmas with newer, higher-priced items," said James Frost, UK Chief Marketing Officer at Worldpay. "However, it doesn't appear to build much by way of improved customer relationships and may even be undermining Christmas sales and customer loyalty."

A recent report from LCP Consulting found that retailers are divided over Black Friday. Thirty-one percent or more of retailers in the US and UK agreed, or agreed strongly, that 'Black Friday is an unprofitable and unsustainable promotion'. Thirty-eight percent disagreed, of which 13% disagreed strongly.

Image via Shutterstock

Tags: Black Friday, ecommerce, loyalty, retail

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