Black Friday Madness Part 3: Online strategy versus the physical store
This is the final part in a 3 part series regarding the retail tradition known as Black Friday.
And the carousel of bad news continues. The Conference board has released its estimate of household spending and, much to the dismay of everyone in our industry; they are predicting a 43% drop in total household spending this season (click here). That’s a huge and ominous number considering the fact that if you aren’t growing by 10 percent per year in this business, you are actually dying in the retail world. This article also suggests that our season will end with Black Friday. If those predictions come true, then we are in for a very rough season and retailers must look at all revenue streams to fill the tills this year.
Black Friday was created with the sole purpose of bringing mobs of traffic in through your door. The catch was always limited quantities on specific models and styles with extended limitations and conditions. There was a time that you could run out
of your hot item and customers would still take the time to browse the store. That is no longer the case and retail consumer behavior is experience a huge shift in preferences and how buying decisions are made. Seasonal selling strategies must conform to those changes and the term ‘business as usual’ is now a death chant. Offering merchandise online has it’s own set of challenges and physical solutions cannot be easily implemented on the internet.
CNNMoney’s article (http://finance.yahoo.com/family-home/article/108212/dirty-secrets-of-black-friday-doorbusters) commented on Sears’ dreadful decision to honor Black Friday deals on their website last year. End result: many unfilled orders and a huge pool of angry customers who probably would never patronize Sears again. Barnes and Nobel continues the trend with an early sell out of its hot new e-reader. Snow has barely hit the ground and desirable products that will in turn generate more revenue are out of stock. Using the ‘we want to build exclusivity’ argument confirms the fact that there was a lack of planning on demand. Embracing a low allocation equation for Black Friday deals will also have medium and long term effects on the business. Most chains have mediocre customer service experiences online. Add to that the frustrations of early out of stocks and you have now you will run into huge retention problems.
What about the whole point of having a sale anyways? If a customer leaves your site with only the deal, you haven’t really achieved anything (you are probably in red on that sale). Getting people to browse associative products on the web is difficult at best. Remember, we are dealing with attention spans in the micro seconds here. Online retailers, big and small, must take store layout and clicks per transaction seriously and optimize the heck out of the process so that online shoppers buy at least 1 more product.
In summary, Black Friday sales and strategies are a setup for failure. Customers are not the same and the whole industry is going through some fundamental changes. We must adapt our sales and merchandising strategies to capitalize on those changes. Shrinking foot traffic counts and baskets means there has to be more focus on each customer. Black Friday deals and marketing strategies are archaic and creates a hostile environment to the customer. Better optimized sales and allocation are necessary to navigate our current economic environment. Retailers must embrace ‘merchant mentality’ when it comes to seasonal selling at the store level or online.
Happy Thanksgiving!
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I disagree completely that Black Friday is archaic. Customers are still coming in the door, and that’s good news for everyone. You make great points that retailers need to work with vendors on a sound basket strategy for the picky consumer; that merchandising is essential to a basket strategy; and that short allocations are bad for everyone. If the retailer has plenty of product and a well-merchandised basket strategy in key segments, Black Friday becomes a great experience for everyone.
Thanks for the comment Rob. The problem is that major chains are actually reducing allocation for Black Friday deals and the whole premise of getting people into the store isn’t working because customers are leaving when the product isn’t available. Thus my reasoning for saying current Black Friday strategies are archaic. We cannot deny that we are dealing with a more aggressive and demotivated consumer. Getting people to the door doesn’t mean you are getting them into the door and I wholly agree that retailers need to work with vendors to overcome that challenge but retailers also need to reevaluate their strategies and use local demographics when starting any sales campaign.
Doron,
Great article and I completely agree that it is time for retailers to change their marketing strategies. While you cannot deny that Black Friday brings in loads of traffic as Rob Pait mentioned in his comment above, we are only talking about one day per year. It’s no surprise that people will camp out in zero degree weather at 3AM to take advantage of a huge bargain, but a retailer cannot obviously sustain this type of practice and expect to stay in business very long. Now, imagine if you could somehow harness this Black Friday phenomenon / hysteria many times throughout the year where consumers always have the opportunity to take advantage of very high perceived rewards / bonuses instead of discounts and retailers can maintain reasonable margins. And you figure out a way to do it all online. A true win-win for the retailers and the consumers. That will be the future of shopping.
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