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Talking Business: After Black Friday, get set for Cut-price Christmas

Richard Hyman, a retail analyst who founded Verdict and now runs advisory website Richard Talks Retail, explains why there’s no chance we will see full-price retail in the run-up to Christmas.

After this year’s Black Friday, we are heading into the most cut-price Christmas I have ever seen in 35 years of UK retail because consumers have just been switching spend into a reduced-price November rather than a typically full-price December.

Christmas trading is rarely out of kilter with the rest of the year that has gone before it and this year’s Black Friday has followed 12 months of relentless price promotions in every month and in every sector.

When retailers consistently shout attention-grabbing discount-led messages, the impact of those messages becomes diluted. Consumers are now suffering from massive promotional fatigue.

We’re entering dangerous and challenging territory when protecting margins becomes really difficult.

I can’t see how the high street can avoid being on permanent Sale until Christmas because demand will be soft and stock needs to be turned into cash.

The overwhelming majority of retail chief executives I speak to say they would love to wave a magic wand and get rid of Black Friday, but it is here now and the question is how we deal with it.

According to our research, 26% of high street retailers opted out of Black Friday discounts this year – a significant number which is quite telling. Next year, I believe more will opt out because retailers are realising that while Black Friday might look good for headline sales, it is not necessarily good for margins.

In fashion, 17% of high street retailers opted out this year, compared to nearly 30% of high street footwear retailers and 40% of high street lingerie retailers, underlining that fashion is feeling the impact more than any other sectors because it is so oversupplied. Only the really strong can set their own agendas and the vast majority are following the herd.

Right now, we are in a period where nobody really knows exactly how they have done for this Black Friday. Obviously retailers can work out how much product they have shifted for headline sales but it is less clear how much it has cost in terms of margin.

In general, this year has been more online than retailers anticipated but I think the weather was a major factor, although how much is impossible to tell. The wet weather put people off trekking round the shops and encouraged them to stay home, shopping online where it was warm and dry.

Retailers that don’t have stores and have bought in advance specifically for promotions are in better shape to do well. Nevertheless, it would still be interesting to see exactly the impact on their sales in the weeks either side of Black Friday week. There is only a finite amount of consumer cash to be spent after all.

 

 

Readers' comments (3)

  • The blame should be squarely at the retailers and that includes the brands own operations. If you can't sell at full price you are doing something wrong and it just shows how inept the way business is run in this industry. If you have no intention of making money, what's the point??

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  • Eric Musgrave

    Sage words as usual from the saintly Richard Hyman. Core to this situation is that the UK is massively over-supplied in fashion (as RH mentions). Congrats to the strong players that ignore the Black Friday/Cyber Monday idiocy and sell desirable stuff at a fair (full) price.

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  • darren hoggett

    Well said Eric!

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