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Our Thought Provoking Insights

Preparing for an unpredictable Black Friday

This month, retail will face one of the most unpredictable Black Fridays to date. Many retailers and brands are already feeling the effects of softening demand due to macroeconomic shifts which, combined with increased supply chain costs and defending market share, are a steadily growing challenge every business is facing. However, retailers can still capitalize on Black Friday this year by focusing on three key strategic and tactical areas to ensure they’re prepared.

Identify competitive positioning

Each business’ investment in Black Friday this year will be entirely dependent on how much margin pressure they’re currently facing. More successful brands with margin to spend will likely launch large offers to attract market share or conversely ride the wave of their success by hardly participating. Struggling brands will be challenged to spend much at all, preferring to be more conservative, however this could be more to their detriment. Since customers will be looking to save on spending wherever they can, ahead of what is going to be a challenging winter for most, sitting out of Black Friday entirely would be a mistake for most retailers as this can still be a great way to introduce or retain customers to a brand and shopping experience.

Understand and accept trade-offs

Going into this Black Friday, retailers need to be highly aware of what the return on their promotional investment is likely to be so that they can spend accordingly and minimize wasted discounting. Clear measures of success established ahead of time ensure a business is clear on the trade-offs. If the overarching goal is to sell through inventory, can the business sign up to potential margin declines if higher discounts offset its margin plan? Similarly, if the business needs to protect margin, are they comfortable signing up to softer unit demand? With a measurable plan and strategy, and the agility and ability to adjust accordingly, retailers will be able to weigh up risk and reward at the outset, rather than having to make big sweeping changes in-event if they haven’t gotten it right.

Create a customer-focused offer

Selecting the right assortment and relevant mix of products for a compelling offer is fundamental to remaining competitive in this market. Once selected, getting the product forecast right will allow retailers to define where the best areas to spend are. They must ensure spend isn’t wasted by applying discounts to the wrong areas, whether that be in certain product categories or high or low elasticity lines. Knowing what discounts are going to give the largest return on each business’ goals will ensure their Black Friday is highly effective, instead of just a race to the bottom.

Whilst Black Friday this year poses a huge challenge to retailers, there’s still plenty of opportunity to go after. If smart about it, brands can use this period to recapture softening demand this Autumn and excite customers ahead of Christmas and New Year so that they return. However, they must also be conscious that this may pull forward more spend than usual from Christmas trading with tightening household budgets. Given retail's current state of play, it's difficult to say whether there will be any true winners of peak trading this year but businesses with a clearly defined strategy and optimized forecasting and pricing capabilities certainly have the upper hand.



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