‘Black Friday’ is the name given to the discount shopping day which follows Thanksgiving each year in the US. UK retailers now use the term to refer to the busy period running up to Christmas as opposed to one peak shopping day. A few years ago, a retailer could just open their doors during the ‘Black Friday’ period and they would be guaranteed a steady stream of customers, happy to part with their hard-earned cash in exchange for party dresses, gift vouchers, the latest cool gifts and all the alcohol they can fit in their trolley. It looks like this Christmas is turning out to be quite a different story. While there are still two weekends and two full working weeks to go until Christmas Day, the latest retail data for November and the first week of December is worrying retailers and they are seriously hoping we’re all waiting until the last minute to spend. They are however only too aware of two big influences on how we behave as shoppers that have changed the game for retail right now – the economy and technology.
It’s the Economy Stupid
I won’t bore with you the current economic climate – you know it’s not good. Eurozone uncertainty is yet another headline making us all nervous consumers – even those who are not significantly worse off as a result of the recession are determined to make their disposable income go further. I have personally found myself entering more competitions recently and actually opening emails in my inbox offering 2-for-1 deals, voucher codes and discounted tickets. As we become more cautious about how we part with our money, retailers are responding with heavy discounts – or at least the appearance of them. The latest Panorama exposé investigated the price wars between the Big 4 supermarkets in the UK and revealed some interesting facts about the ‘deals’ we are being offered to entice us to spend our precious pounds. In fact it was revealed that 42% of consumers don’t trust supermarket offers and 47% of us have felt misled by offers.
Figure 1: Clothing, Footwear and Accessories sector, Week-on-Week 2010 & 2011, IMRG Capgemini E-retail Sales Index
The British Retail Consortium’s figures for November reveal that sales performance was the lowest since May; sales values were 1.6% lower on a like-for-like basis from November last year and on a total basis, sales were up only 0.7%, against a 2.8% increase in November 2010. Retailers might not be completely disappointed though. Because Christmas falls on a Sunday this year, we have a full working week and Christmas Eve to do last-minute shopping and the two days after Christmas Day are bank holidays, leaving retailers with the hope that the second half of December will make up for the first.
To move away from the doom and gloom for a minute, let’s turn to technology. The way it is transforming how we interact with each other socially and professionally is also changing the way we interact with retailers. Not only do we want to shop online, we want to shop with our smartphones and tablet devices and on top of that, we expect to be able to find the same products at the same price as we’d find on the high street. In fact Experian Footfall reported that as much as 12% of online sales will be made using a smartphone this Christmas. We can also now compare prices for the same product easily online, meaning we’re doing quite a bit of research before we hit the high street, which inevitably puts pressure on retailers to drive prices down and optimise their marketing budget to get you into their store. A metric which illustrates this trend is the conversion rate, which online retailers use to understand what proportion of visitors to their site actually makes a purchase. From the IMRG Capgemini E-retail Sales Index data below, you can see that the average annual conversion rate is falling as consumers use retail websites for research purposes more and more, but the trend around Christmas time is remaining the same as retail generally increases regardless.
Figure 2: Monthly Sample Average Conversion Rates, 2009 – 2011, IMRG Capgemini E-retail Sales Index
Online sales at Christmas typically take place earlier than high street sales due to the nervousness about Christmas post. In 2010, December snowfall stung many online consumers when their orders arrived too late for Christmas, which appears to have led e-retailers to offer Christmas shopping deals a little earlier than normal this year. Early indications are that November will have been a disappointing month for e-retail. UK e-retailers refer to the busiest online shopping day of the year as ‘Cyber Monday’, which comes from the US marketing term designed to encourage online spend the Monday after Thanksgiving. Cyber Monday may have been a week later in the UK than in the US this year due to the fact that most people got paid during the last week in November. Amazon.co.uk certainly seem to think so – they have got over 100,000 products on offer this week as part of a Cyber Monday promotion, perhaps an indication of their fears about it not being as strong a week as usual. As far as the high street is concerned, footfall in November was also disappointing. The Experian UK National Retail FootFall Index reported a year on year Index for November which is trailing behind 2010 by 3%. Sectors that have been particularly badly hit have been Health and Beauty (suffering their first year-on-year fall for two years) and Clothing. Food and drink sales did increase though, perhaps a factor or the retail wars at supermarkets, or simply the fact that they are more essential purchases.
So the economy and technology are certainly changing the way we shop, of that there is no doubt. Quite how Christmas 2011 pans out for the retail industry remains to be seen though – no doubt the papers will be keeping a close eye over the next few weeks on whether it will be a case of ‘better late than never’ for retailers or whether the shrewd consumers of 2011 will keep their belts tightened until 2012.