How Aussie retailers can avoid the Black Friday nightmare before Christmas
How was your Black Friday weekend last year? No really. Was it actually profitable? Because on one hand, consumers spent record amounts during cyber weekend last year, leading to large year-on-year growth for retail in November.
But, and this is a big but, this was almost entirely matched by a large decline in December, which looks even worse when we account for inflation. So while the sales period may have shown top-line growth in revenue and volume, digging into the numbers now tells us that in many cases these sales were just shifted forward from the traditional Christmas period – at big discounts for consumers.
The thing is, we predicted exactly this would happen.
Last year, we wrote a feature for Inside Retail about our ongoing research with Associate Professor John Hopkins of Swinburne University of Technology. We’ve been studying retailer strategies and sentiment towards pre-Christmas mega sales – Black Friday, Cyber Monday, Singles Day etc. Through interviews with retail leaders, we’ve continually heard that many brands participate in these sales reluctantly, acknowledging they train consumers to shop early and demand big discounts. We used the term ‘Nightmare before Christmas’ to summarise the sentiment across the industry, while also making a pretty neat Christmas movie pun.
Even as senior leaders told us they were worried about getting consumers hooked on the ‘discount drug’ and eroding their brand perceptions, many brands still leaned into large site-wide discounts, with some starting weeks before the actual event. Of course, we also saw some interesting approaches, like unique product ranges, tailored offers for loyal customers, and even anti-sales. Still, the overall sales results support the fact that most retailers focused on wide price discounts, and the industry may have suffered as a result.
These big sales are clearly here to stay – consumers expect them, and retail leaders admit to being hooked on the revenue boosts they bring. So what can we do about all of this? Well, strategy matters. As the industry struggles with multiple external factors and margin pressures, now is the time to start planning for the 2024 festive season. It’s an opportunity to assess the value of these sales events for your brand, and develop strategies to maximise their benefits while avoiding some of the risks. Going back to our research and what we’ve seen since, here are four things to consider:
- Look at profit, not just top-line figures
One of the sentiments we consistently heard from retail leaders is that it’s hard to look past the top-line numbers when evaluating the impact of these events. This is natural. It feels great to report that website visits and social engagement skyrocketed, and top-line revenue and sales volume grew by a few, or even several, per cent. We all love to see a chart going up. But are these top-line figures good if they come from a 60 per cent or even 70 per cent discount? If each of these discounted sales is losing you money, do you really want more of them?
Of course, this is an over-simplification. There is a lot that goes into measuring the success of pre-Christmas sales. Our point is that we need to go past the obvious figures like clicks, engagement, and even sales volume, and look at the profitability of these sales, which is strongly related to the next point.
Another common theme we heard from retailers is that they are so focused on ‘winning the weekend’ that they can lose sight of the longer-term impact. We heard how the focus on price discounts is a ‘race to the bottom’, and not many businesses can sustain this strategy long enough to see it pay off. So why do they still do it? Well, many retailers feel pressure to participate in sales out of FOMO. They don’t want to miss out on share of wallet in the short term (even at a discount), and they lose sight of the long-term impacts this can have.
This myopic view has risks. Getting sales now could train consumers to wait for discounts rather than buying at full price, and could even affect brand perception and value in the long term. So even as you try to win the weekend, think ahead and make sure you’re not leading yourself down a path you don’t want to tread.
- Offer more value beyond price
Pre-Christmas sales have become synonymous with large discounts. Consumers now expect them, as we touched on above. Yet price is only one part of the value equation. Without wanting to take you back to first-year marketing, price is how much consumers pay for a product or service, whereas value is the benefits they receive, relative to the price. So while customers have been trained to wait for sales to receive a better price, there is an opportunity for retailers to push them out of this discount mindset by focusing on value. Finding ways to offer value to customers by surprising and delighting them outside of discounts can help maintain customer satisfaction and loyalty without the same harmful effect on the bottom line.
As an example, customers are responding to personalised offerings more than ever. So rather than a one-size-fits-all approach oriented towards heavy discounting, think about how you could customise your strategy to consumers based on their preferences and behaviours. Or perhaps you could offer additional (non-price) benefits to loyal customers who shop during the events. Lean into what makes your brand unique, beyond what your products cost.
- Have a strategy – and stick to it
Our main point from this article comes to this: If you’re going to participate in pre-Christmas mega sales (and we all know you are) then have a reason and strategy for it, and stick to it. Whether it’s about attracting new customers, rewarding existing customers, or moving old stock, have a clear reason for participating in these sales, and match your strategy to that goal. Don’t just chase sales for the sake of it, because doing so at large discounts is probably not profitable and you might be setting yourself up for failure later.
These sales events don’t have to be a nightmare. Done well, they could be a fantastic way for consumers to tick off some needed gift shopping (their ‘Christmas admin’) while retailers gear up for the traditional holiday season (the ‘Christmas joy’). But getting there means planning, having a clear strategy, and being genuine in how you approach the period. Now is the time to make sure that strategy is ready to go. So this year isn’t just another nightmare.
This story first appeared in the May 2024 issue of Inside Retail Australia magazine.
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