With inflation at record highs, the cost of living crisis worsening, and talk of a recession around the corner, it’s obvious that consumer confidence will be low this Black Friday.
A forecast by the IMRG Capgemini Online Retail Index suggests sales for this year’s event will be down 5% year-on-year, with indications that it could fall even further.
Clothing is expected to be the worst performing product category, whilst Home & Garden is currently showing the best outlook on last year’s figures. However, despite its growth, it’s still expected to be negative during the peak trading period.
“The real problem for online retailers is a drop in conversion,” said Andy Mulcahy, Strategy and Insight Director at IMRG. “While sales growth has been negative for over a year and a half, there is actually still growth in traffic to retail sites. The number of visitors who complete a purchase has dropped 20% in 2022 against the same time last year, with the main pinch-point being less people adding items to their basket from the product page.”
He added: “There is a lot of industry anxiety over peak trading, and the honest reality is that if retailers could guarantee sales for Black Friday week, as per our forecast, they would probably take that. It’s well documented that things are very tough at the moment, if the situation deteriorates further, it really will be cause for alarm.”
Taking a deeper look into the various aspects that might affect this year’s Black Friday sales, Simon Binge, Commerce Senior Manager, Customer Transformation at Capgemini, shared his key observations, including which retailers might come out on top against others:
- Pressure on costs to shape promotional activation: Retailers will be facing into enormous costs pressures across cost of goods, transport, energy and overheads, but will be cautious on passing the full burden of this onto consumers. Whilst traditionally Black Friday has focused on money-off or percentage-off discounts, the cost challenges this year will lead to many retailers exploring value-add and bundling promotions. By bundling products together, retailers are able to drive higher average basket value whilst improving unit economics through efficiencies in warehousing and fulfilment.
- Campaigns to start earlier and run later: It’s well documented that many retailers will be heading into Black Friday with excess inventory due to a summer of depressed sales combined with supply chains strategies brought into play to combat disruption. Black Friday is a key period for clearing through excess supply, but with the aforementioned cost challenges, retailers may struggle to offer deep enough discounts to win the share of attention necessary in such a short-window. Many retailers will be looking to bring forward their key campaigns, and potentially run them longer than usual. Amazon’s October Prime Day event is an example of a retailer trying to bring forward the promotional period and generate buzz. NielsenIQ reported the event landed well with consumers as a ‘subdued’ Black Friday prequel. With consumers eager to strategically capitalise on sales and with many earmarking budget to utilise over the sales period, retailers should use this opportunity to sway consumers’ purchasing decisions.
- Retention over acquisition: Black Friday is already the most expensive digital marketing period but combining that with a World Cup means retailers will face spiralling acquisition costs. To combat this, retailers will need to focus on increasing order frequency from their existing customers through personalised offers and incentives. Similarly, owned channels & organic marketing like email, unpaid social, content blogs etc are lower cost alternatives to generating site traffic.
- Service as a differentiator: With commercial challenges affecting the depths of discounts available, quality of service becomes a big selling point. Retailers who offer fast, free delivery or omni-channel fulfilment & returns, will want to make sure this is marketed clearly, communicated frequently and, most importantly, delivered convincingly.
NAM Implications:
- ‘inflation at record highs, cost of living crisis worsening, and recession’ – says it all…
- i.e. a really Black Friday.
- Time to hunker down…
- …and optimise available business.
