Europe’s bargain-busting Black Friday bonanza might not be all it seems, if the event’s silent profit-drainer – returns – has anything to do with it. Chris Field, Chairman of Retail Connections, a network for innovation in retail, discusses.
If the 200% increase in Google searches is anything to go by, Black Friday 2015 is going to be BIG. How big? At our recent Retail Connections event discussing the big day, Schuh’s Head of Ecommerce, Sean McKee, said he’s planning for a 20% increase on last year’s activity, but the reality is we just don’t know.
In theory, even with significantly higher activity, retailers should be in a stronger position than 2014 – given the lessons that were learned. Crashing websites, fights in the aisles and a massive delivery bottleneck should hopefully just be a series of bad memories, as companies have had 12 months to improve the infrastructure and processes underpinning Black Friday.
What they may not have legislated against, though, is the ‘butterfly effect’ that Black Friday causes later in the festive season. The reality is that not everyone who buys stuff on 27 November is going to keep it – and this could potentially cause a massive logistics headache.
‘A triple whammy on profitability’ was how Clear Returns CEO Vicky Brock, another speaker at our event, described Black Friday. Margins are very tight to start with, there’s the cost of getting the goods to the customer – and then there’s the cost of getting it back again, if the customer decides to return their purchase.
Just at the critical point in mid-December, where retailers are focussing their efforts on selling, a huge pile of Black Friday stock comes back into their system. And with most personnel tasked with getting orders out the door that stock sits there, until the end of the month, when it ends up in the January sales at a mark down price.
Rather than the gift that keeps on giving, Black Friday has the potential to become the profit drain that keeps on sucking. That’s not to say retailers shouldn’t be embracing it (it’s virtually impossible for a company of any size to ignore it), but it is critical that their logistics strategy extends beyond the day itself.
The best prepared retailers will look not just at getting goods to the customer, but work out how to get unwanted items back into circulation as quickly as possible if that customer decides they don’t want to keep it. And if they can achieve this on Black Friday, they can do it effectively at any other time of the year.
Main image: Launch of Retail Connections. ©Richard Eaton