The Festive Squeeze: Can Retailers Afford to Do Black Friday This Year? 

Black Friday and Cyber Monday traditionally mark the start of the festive shopping season, with big ticket promotions that seem to get bigger every year.

Usually, the event is hotly anticipated by retailers and consumers alike – for some retailers their BFCM revenue makes up a significant percentage of their figures for the whole year, and for most consumers, the event is a chance to enjoy splashing out on goods for themselves, and as gifts, at attractively low prices.

This year feels, and is, different.

Holidays (and Challenges) Are Coming

The cost-of-living crisis is at its peak; families in the UK and US are struggling to pay their heating bills and put food on the table due to soaring inflation, out-of-control energy prices and looming recession.

It’s enough to dampen the festive spirits of anyone – and it means Black Friday this year will be less ‘joyful splurging’ and more ‘stressful scrambling’.

New research by leading operating system (and our sister company) Brightpearl suggests more shoppers than ever plan to do all their Christmas shopping during BFCM, purely because they need discounts to be able to put presents under their trees.

Shockingly, two thirds (64%) of shoppers in the US, and four in 10 (41%) in the UK, admit they are relying on retailers to discount goods in order to buy the things they specifically need for Christmas.

And while some will only be buying if the price is right, others will be buying less – and some won’t be buying anything. The data revealed that more than half (52%) of shoppers in the USA, and a quarter (26%) in the UK, are seriously worried they won’t be able to afford to celebrate Christmas at all this year.

Left out in the cold

So where does this leave retailers? Consumers are counting on promotions, but can retailers afford to give them?

The reality is that while consumers across the globe are under huge financial pressure, so are retailers. Business costs are higher than they’ve been for decades and we know from Brightpearl research earlier this year that one in four (26%) UK brands are just four weeks away from supply chain issues causing ‘crisis point’ issues with cash flow.

To add insult to injury, merchants are also grappling with unpredictable and uncertain demand and a worrying shortage of workers.

Discounts are expensive and they take their toll on merchants’ already straining profit and loss sheets. Consumers might desperately need promotions in order to spend this year – but the harsh reality is that some retailers may not be in a strong enough financial position to offer them.

That’s the glum news. The good news is there are things retailers can do to give themselves the best chance of making this year’s festive shopping season successful and profitable.

Let’s look at three examples:

1. Ensure your business is operationally sound

One in five (19%) of UK consumers and 24% in the US plan to start their shopping early this year, which means peak demand may happen earlier. Retailers should automate their back office operations to ensure they aren’t caught out by a spike in orders. Automation via a retail operating system is also a smart way to remove manual inefficiencies from your business and the cost savings can be significant.

2. Buy inventory earlier – and get the balance right

It’s worth considering buying inventory earlier – regardless of when sales peak. Calculating the exact right amount of stock to order in order to fill every last square inch of shipping containers is a clever way to optimize space and drive costs down. Inventory Planner can calculate this on your behalf and tell you exactly what to buy to maximize the space available and save cash.

We also know how important it is to get the balance right when it comes to inventory – you don’t want to run out of stock and miss out on sales, but you definitely don’t want to tie your cash up in stock you can’t shift once BFCM has come and gone.

Make intelligent decisions about when to order stock, and how much to order. Inventory Planner factors in promotions, historical sales and supplier lead time to give you astonishingly accurate buying recommendations that eliminate the risk over excess stock and out-of-stocks.

3. Be strategic if you slash prices

Finally, but perhaps most importantly, if you do offer discounts you should do it strategically. This means primarily promoting products that are already stacked up in your warehouse or that are proving to be slow-movers.

If the prospect of trying to work out what those items are fills you with dread, use Inventory Planner to analyze your sales data. It can flag up slow-moving items sooner rather than later, giving you enough time to take action.

The bottom line

As the dark winter nights draw colder, and the cost-of-living crisis deepens, it’s true that it might not be the cheeriest of festive shopping seasons this year.

However, with Inventory Planner on your side, it can still be a profitable one.

Start your 14-day free trial now.