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Profits could suffer in Black Friday discount frenzy

As Black Friday and Cyber Monday cement their position in the shopping calendar, retailers have been warned that the domino effect of discounting could have harmful consequences for margins.

More UK stores have embraced the traditionally US shopping days this year as awareness increases among consumers, driving retailers to offer longer and deeper discounts than ever before. Research from analysts Verdict found 47% of shoppers intended to purchase through a Black Friday promotion this year and a quarter are planning to start their Christmas shopping earlier than in 2013.

A spokeswoman for John Lewis, which opened from 8am on Friday and had 100 deals online and in stores, said: “[Black Friday] is changing customer shopping patterns in the run-up to Christmas, taking over from Cyber Monday as the biggest online business day of the year.”

“This year is the first year we have really got behind the two days as we see them becoming more and more popular with British consumers,” agreed a spokesperson from House of Fraser, which offered discounts of up to 70% on Black Friday and will time promotions to run on over 12,000 products on Cyber Monday (December 1).

However, as many retailers rushed to discount, concerns were raised over a potentially dangerous domino effect. Professor Chris Edger, a retail expert from Birmingham City Business School, said: “Aside from a handful of retailers who benefit from first mover advantage, when everyone else steps in to ‘get a piece of the action’, it turns into a defensive exercise for many.  

“The margin consequences of this move, as consumers become addicted to November discounting and expect it as a matter of course, could have grave consequences for profitability over the longer term.”

Tony Links, buying manager at chain Slater Menswear, which is offering online discounts over the weekend, said: “You need to get involved to be part of the gang; we’re obliged to participate because everyone else is.”

Retail analyst Nick Bubb pointed out that the level of discounting is “disappointing but maybe not surprising”, given the excess stock retailers were left with following the mild autumn. He added: “Planned promotions are not too harmful to margins, but they still pull sales forward and encourage a discount culture.”

Some retailers, including Shop Direct and independent mini-chain Ulster Stores, bought specifically for promotions this year. New menswear etailer The Idle Man plans to do so next year.

“We didn’t feel forced to do it, but [Black Friday and Cyber Monday are] looking like [the new] January Sales, something that’s going to come round every year so you need to offer something,” said The Idle Man’s chief marketing officer Alex Outlaw.

Despite the rise in popularity of earlier discounting as a result of Black Friday and Cyber Monday, many retailers told Drapers they still had high hopes for a peak in sales on Boxing Day.

Colin Temple, managing director of Schuh, said: “No doubt a crazy period of discounting during Black Friday will take the edge off Boxing Day, but we feel they are slightly different customers with a differing mind-set.” He said the pre-Christmas shopper is more discerning in looking for gifts, while the post-Christmas shopper is more likely to be bargain-hunting for themselves.

Westfield director Myf Ryan said footfall for the two Westfield centres - London and Stratford - reached close to a quarter of a million in 2013, while Boxing Day attracted some 360,000 shoppers. “Boxing Day sales remain a huge attraction for shoppers and we can’t see that changing,” she said.

Readers' comments (1)

  • All Black Friday has done has slowed trade to a standstill in the run-up. November has been the worst on record for some. If there was a button to eradicate this nonsense, we would all press it.

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