Tristan Rogers, ceo of ConcretePlatform.com, on why Black Friday could lead to poor execution from retailers who are overreliant on discounts.
To completely misquote the late writer Douglas Adams: “Retail is big. Really, really big.” And what that translates to in monetary terms is an expensive disaster waiting to happen.
Retail seems like a pretty crazy business model when you think about it. Designing, manufacturing, shipping, stocking, presenting, marketing and selling consumer goods in a high footfall environment; paying rent, business rates, wages and utilities… all in the hope that at 09:00 in the morning, someone might wander by, enter your store and possibly buy something. And yet retail is really, really big. So we know it works. Sort of.
Black Friday, like any other promotional event, is designed to woo consumers into stores for a deal that’s too good to miss. And the increased footfall, having been driven by either a specific promotion or just the general promise of discounted product, is seen as the first step towards selling more stuff to even more people.
But of course by discounting, the gross margin of that product is now reduced and, proportionately, the net margin could well disappear, when faced with the huge overheads that retailers carry in their business models.
The store environment is where the battle for survival is won or lost. A recent report by global consultancy McKinsey shows that in a maturing retail environment, luxury ecommerce could be topping out at between 15-18% of total revenue.
This means that up to 85% of retail revenue will still be coming from the store environment. So it’s critical that in-store execution of a brand’s proposition is done to the best of its ability.
Yet today, it’s still common practice for retail brands to communicate with a store through a mishmash of manual processes. This one-way approach to communication ignores the needs and circumstances of a store’s individual requirements.
It’s common for a retail head office to have no idea on whether specific communications and tasks have actually been carried out – let alone how well they have been executed. When you then think of the number of stores being communicated with in this way, the problem is huge. If the store is a battlefield, the troops are seriously ill-equipped.
Think of it another way. If a retail brand could deliver 100% operational control and visibility into its store network, could it generate a 1% uplift in store revenue? I’ve yet to meet a retail executive who doesn’t think so. When you think that many retail brands are struggling to make more than 5% margin, that 1% is meaningful.
So Black Friday can’t just be about discounts. It needs to be underpinned by brilliant operational execution, from planning through to task management and education delivery into store, which in turn drives brilliant customer service and increased basket value.
A retail brand should never be reliant on discounts. It should only use them tactically to clear old stock or draw footfall to lead to other full price purchases. Black Friday is no exception.
Black Friday is always the Friday following national holiday Thanksgiving Day (the fourth Thursday of November) in the US. The actual date obviously changes every year, but in 2015 it falls on Friday November 27.
Since the early 2000s, Black Friday has been regarded as the start of the Christmas shopping season. On this day, most major retailers in the US open very early and offer promotional sales. But in the UK, most of the Black Friday deals are offered online.
*Tristan Rogers is ceo of ConcretePlatform.com, which describes itself as ‘a store communications platform for brands.’ with retail clients such as J Crew, Gap, Tesco and Marks & Spencer.