Black Friday: How retailers can better manage peaks and troughs

November 27th, 2020 Written by Neil Dunlop

Black Friday has arrived and it marks the busiest shopping day of the year, encouraging millions of people to take advantage of the huge savings on offer. But today feels a little bit different to previous years with the majority of shopping being done online as restrictions hamper high street shopping.

As is the case with most sectors, it’s hard to predict exactly what the retail landscape will look like after the pandemic, but there are things retailers should be considering to better manage peaks and troughs both now and in the future.

The impact of e-commerce on traditional retail peaks

Black Friday is always a challenging period for retailers to manage, but it’ll be even harder this year because the peak started in mid-October and is unlikely to end until late January. In addition, there has been unprecedented demand placed upon retailers’ websites, particularly today, due to the fact non-essential retail stores remain closed.

Lockdown restrictions have meant more people have been spending time online, browsing the internet for bargains as a way to fight boredom and make themselves feel better. It’s now also much easier for shoppers to both receive and return home deliveries due to working from home more often, and the introduction of new services such as the Royal Mail’s parcel pick-up scheme. The added convenience has led to a surge in online shopping and Black Friday offers retailers some hope after a difficult year where sales have slumped for most.  

Increased online demand and the pressure on retailers to protect their revenue could mean that the deals you see today aren’t as ‘amazing’ as the ones you’ve seen in previous years. Black Friday is a highly competitive period where retailers typically fight for footfall in their stores by creating compelling discounted deals. With more people buying their gifts online this year, shoppers are likely to make an explicit choice to visit a particular retailer’s website as opposed to visiting multiple physical stores. It means retailers don’t necessarily need to apply as aggressive discounts; shoppers are more likely to buy from trusted brands and ones that offer the greatest levels of convenience. 

The impact of e-commerce on future retail peaks remains to be seen and will depend on a range of macro factors. Earlier this week, the UK government talked about aiming to return to something ‘close to normal’ by Easter. Valentine’ Day, which is another traditional retail peak, could be another period where retailers will have to start their promotions even earlier to encourage people to order early and avoid shipping delays.

The future of large sales events

Despite many people facing financial uncertainty, early indications show that shoppers are expected to spend more than £750 million this year – a substantial increase on the £718 million spent in 2019. Large sales events are unlikely to go away, but they might not be as attractive to consumers in the future because of an expectancy that amazing deals will available throughout the year. The demand for products at peak periods is so high that retailers often struggle to deliver, so consumers often choose to wait and shop during quieter periods to get what they want. Retailers must focus on staffing, processes and logistics throughout the year, and not just during retail peaks, to cost-effectively meet demand.

The success of large sales events in the future will depend on how they are marketed. Earlier this year, Amazon’s flagship event – Prime Day – proved that there is still an appetite for large sales events. Amazon reported that marketplace sellers sold more than $3.5bn in 2020, which was an increase of nearly 60 per cent from last year. The reason it was so successful was due to how it was marketed; it was promoted as an exclusive event for those with a Prime membership, playing on customers’ fears of missing out on amazing deals. The battle for sales tends to take place a few months prior to a large event when brands start to communicate their value before a consumer has even considered shopping.

Preparation for retail peaks

With people spending more time at home this year and having less to look forward to, we’ve seen the Black Friday retail peak start much earlier than usual. But even before the Millennium, retailers have gradually been releasing their seasonal products earlier than previous years in an attempt to get ahead of their competition and cope with demand. Peaks will continue to increase in length, creating more pressure on retailers to ensure their systems are scalable and have the capacity to handle the unprecedented levels of traffic.

We’ve seen adverts on TV from retailers encouraging shoppers to buy earlier this year to avoid missing out – again, playing on peoples’ fears. Doing this allows retailers to work closely with their supply chains and couriers to better manage demand. While e-commerce has made it easier for consumers to get what they need, it’s much more challenging for retailers to deliver 20 parcels to 20 different homes than it is to serve 20 customers in a bricks-and-mortar store. Retailers need to tackle the challenge of optimising their ‘last mile delivery’ costs; delivering goods from their transportation hubs to the final destination.

The role of artificial intelligence and personalisation

To better manage future retail peaks, retailers should look to embrace advanced technologies such as artificial intelligence (AI). AI can be used to deliver personalisation and make appropriate product suggestions based on a customer’s preferences. Using a customer’s previous purchase data, AI can make it easier for a shopper to find the products they like and offer relevant discounts to drive customer loyalty. In addition, AI can provide informed recommendations to help web visitors discover new products, suggesting options based on the behaviours of similar users – demographic factors such as age, gender, and income. A report by McKinsey found that using personalisation to make the buying experience more compelling can increase revenues by up to 30 per cent.

With limited online user attention, retailers need to focus on optimising what they present on their website to visitors and show products that make a good margin. AI enables businesses to understand customers’ product affinity. It’s proven that customers perceive products that they have a high affinity with in the same way. For example, a bottle of sherry A has a high affinity with a bottle of sherry B; they are the same thing and both fulfil a desire to drink sherry. The two products can be grouped into the same ‘consideration set’, but the difference is the first bottle generates a higher margin for the retailer. Using insight from AI-driven personalisation, the retailer will always present bottle A to the customer to unconsciously influence their purchase.

The future of retail

The world of retail has already changed and it’s likely to change further in line with changing shopping behaviours. A retailer’s logistics, technology and brand will all play a role in helping deliver a new customer experience. Retailers that carefully embrace these three elements will be the ones that are best placed to benefit from the changing retail landscape, which may or may not include troughs and peaks.

Written by Neil Dunlop