Black Friday is just around the corner, set for November 29th this year. Brands and retailers are already busy planning their big promotions.
We chatted with some analysts and experts to get the scoop on what to expect this year. They shared insights on delivery times, consumer confidence, and inventory levels, plus how retailers are gearing up to make the most of the shopping frenzy.
Consumer confidence is up — but it’s not that simple
The economic situation is looking better than it did this time last year, with inflation easing in both the UK and the US. According to Deloitte UK, spending on discretionary items like holidays, dining out, and clothing has finally turned positive for the first time since Q3 2021. PWC UK’s consumer sentiment survey also shows that shoppers are feeling more upbeat thanks to lower inflation and interest rates.
However, experts still see a cautious consumer base. The luxury sector is experiencing a slowdown, with big names like LVMH and Kering seeing weaker demand in some areas. “Many people are opting to save their wage gains due to higher interest rates instead of spending,” says Kelly Miely, a retail partner at Deloitte. She also notes that prices are much higher than they were two years ago.
Lisa Hooker from PWC UK adds, “Interest in Black Friday is likely to be higher than last year, but retailers will still need to work hard to show value and encourage cautious shoppers to spend their hard-earned money.”
Despite the improved economic indicators, the overall sentiment remains one of caution. Consumers are more willing to spend, but they are also more selective about where their money goes. Retailers will need to be strategic in their approach, offering compelling deals and demonstrating clear value to entice these careful spenders.
The challenge will be to balance attractive promotions with maintaining profitability, especially in a market where prices have significantly increased over the past two years.
Consumers in the US are also being cautious. Neil Saunders, managing director of Globaldata’s US retail and consumer division, points out that while there are some positive signs like moderating inflation, lower gas prices, and reduced interest rates, these factors aren’t enough to significantly boost the consumer economy. He predicts that growth will be modest, saying, “The Black Friday event will be solid, but it will fall short of being spectacular.”
The luxury multi-brand retail sector has faced significant disruptions this year. Matches went into administration, Farfetch was rescued by Coupang, and the future of Yoox Net-a-Porter is uncertain. One of the challenges is that more consumers are choosing to shop directly from brands. This shift in consumer behavior is making it harder for multi-brand retailers to compete and maintain their market share.
Saunders notes, “Multi-brand retailers will really need to pull out all the stops this year to generate good sales growth.” He emphasizes that while Black Friday might see a slight uptick in sales, it won’t be enough to offset the overall softness in the market. Retailers will need to be innovative and strategic in their promotions to attract cautious consumers who are more selective about their spending.
Overall, the retail landscape is challenging, with both economic and consumer behavior factors at play. Retailers will need to adapt quickly to these changes and find new ways to engage and entice shoppers. The key will be to offer compelling value and unique experiences that can draw consumers in despite their cautious spending habits.
In-store shopping is becoming more crucial than ever, according to Ryan Llewellyn-Pace, founder and CEO of Pace Partnership London. “People are returning to physical stores, so having an omnichannel strategy is increasingly important,” he explains. “Black Friday is a key time for full-price sales, and retailers will use this period to sell gifts at full price, especially in-store.”
Shipping and logistics challenges will impact discounts
Retailers are facing tough choices between more expensive air freight and cheaper, but currently disrupted, shipping options. In the US, the biggest worry is a potential workers’ strike at East Coast ports, which could significantly disrupt apparel imports just as we hit the peak selling season.
Neil Saunders explains that most retailers are aware of these potential issues and are finding workarounds, like routing more products through West Coast ports or using air freight. However, these solutions come with higher costs, which retailers will need to account for, either through higher prices or reduced margins.
Geopolitical conflicts in the Middle East have also disrupted some shipping routes between Asia and Europe. Attacks on commercial ships passing through the Red Sea, a crucial waterway for global trade, are affecting the Suez Canal shipping route. Manraj Ahdan from Advanced Supply Chain (ASC) Group explains that shipping companies are looking for safer routes, which are often longer and lead to supply chain delays.
These delays are further compounded by increased demand for alternative routes, making them busier. On a positive note, disruption has eased along some routes. For example, shipping costs from Shanghai to Rotterdam have dropped significantly since July, according to data from maritime research firm Drewry.
Retailers are planning ahead by experimenting with new routes and switching from sea transport to air freight, or using a combination of both, to cut down on delays. However, all these adjustments are putting pressure on retail margins.
As a result, ASC expects that discounts may not be as steep as usual in the lead-up to and during Black Friday. Retailers will need to be strategic in their approach, balancing the need to offer attractive promotions with the reality of higher shipping costs.
With rising costs, retailers face a tough choice: either absorb these costs or pass them on to consumers, says Laura Morroll, a supply chain partner at PWC UK. This decision could significantly impact pricing strategies this Black Friday. Additionally, there’s the aftermath of Black Friday to consider, as one in every four items will be returned.
Morroll points out that the post-Black Friday period brings the same challenges every year for everyone in the supply chain. It will be interesting to see how charging for returns, a practice more retailers have recently adopted, affects consumer buying behavior.
Excess stock: What will sell?
Stock levels in the US and the UK are quite different right now. In the UK, retailers are dealing with an excess of warmer weather clothing after a particularly rainy summer. Laura Morroll from PWC UK explains that the disappointing summer season and cautious consumer spending have led to excess inventory.
So, while there are plenty of new season coats, boots, and glittery eyeshadows for the festive season, retailers are still stuck with unsold swimsuits and sunscreen. With budgets tight, savvy shoppers might be looking to snag next year’s summer products this November.
In the US, inventory levels are more balanced. Neil Saunders notes that most apparel retailers have been cautious with their buying to avoid too much excess stock. While there are some issues in the luxury sector due to a slowdown, it’s not a major problem.
This means there might be fewer Black Friday bargains from retailers trying to clear out excess inventory. As for which categories will do well, Harvir Dhillon from the British Retail Consortium says beauty products will continue to shine this Black Friday.
Thanks to the “lipstick effect,” where people spend more on small indulgences during tough economic times, beauty products are expected to see high demand. In the luxury fashion segment, price-sensitive customers might focus on small accessories, which are profitable for brands due to volume growth.
Deloitte’s Miely suggests that retailers will likely emphasize core products and ranges over trendy items to mitigate risk and ensure longer-term sales potential if they don’t sell out during the promotional period.
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The winning promotional strategies
Just like in recent years, the 2024 Black Friday sales are expected to stretch across November and possibly into December. Laura Morroll points out that businesses have been extending Black Friday to cover the whole month of November, but they’re getting smarter about their promotions. Instead of blanket discounts, they’re being more selective.
This strategy helps manage excess stock and attracts savvy shoppers who use deep discounts to buy items on their wish lists, either for themselves or for holiday gifts. It also helps with logistics and customer flow, making it easier for cautious consumers to spread out their purchases over a longer period during the peak shopping season, adds Miely.
Brands are moving beyond traditional discounts and experimenting with “value-driven promotions,” predicts Miely. This could mean bundled offers, loyalty program benefits, and exclusive experiences. There might also be a focus on cross-selling, encouraging additional purchases of products that complement the original item. Loyalty programs are particularly beneficial as they capture customer data, allowing for personalized promotions.
These strategies are especially relevant for luxury brands that want to navigate the promotional landscape without compromising their high-end image. Jacqueline Windsor from PWC UK says, “Winning Black Friday is about precision rather than mass promotions to optimize sales and protect margins. Playing smarter is the key to getting ahead this season.”
How retailers perform on Black Friday will set the tone for the rest of the holiday sales period. Saunders notes, “This Black Friday will be a marathon, not a sprint. Many retailers are looking for sustainable growth throughout the holiday season, so they’ll plan their promotional calendars accordingly.”
Black Friday remains a major event, but it’s just one of many tactics retailers will use to encourage spending. Retailers will need to be strategic and innovative to capture consumer interest and drive sales throughout the entire holiday period.
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