Black Friday is one of the most important holidays for retailers. It marks the start of Christmas shopping season and also represent the busiest shopping day of the year.
Every year it breaks a lot of sales records and attract millions of customers. Although it’s a well-established date in the media and customers in general, does it really benefit retailers?
Logistical Challenges for Retailers
The first thing we must consider are the logistical challenges that comes with the discounts, fulfill of orders, increase in demand and others. Not only that, but customers are also demanding deeper discounts and extension of dates.
One effect of deep discounts is the possibility to cannibalism on retailers own sales through the rest of the year because customers program their buying seasons to the holiday.
Another aspect to consider is the customers searches. Loyal customers tend to consume during the whole year, but black Friday customers are used to find the best deal, not considering brand.
The result of that is that the discount may create a situation where customers don’t buy on normal prices. So, the cannibalism will be deeper and may even alter the price elasticity on products.
Getting the right price
Not only the supply logistics affects the possibility of profit, but also the pricing strategy. With a small discount, customers will look for another option, with a discount to high, you’ll lose profit.
Setting the wrong price may affect brand recognition, as customers will perceive it as a trick to profit more, when the discount isn’t enough or, on the other hand, associate bad quality to the product.
Finally, customers expectations are higher during holidays, so it also presents a problem to retailers that must keep the level of attraction. So, customers behavior is a key factor.
The problematic for small business
One thing is certain, small business avail way less from the holiday than big retailers. Firstly, because small business doesn’t’ have the same advertising capacities, so it’s harder to spread the word about their offers.
Not only advertising, but small business usually can’t compete with the prices. Big retailers can offer deep discounts and remain profitable, while small business need to sell at higher prices.
How retailers profit from Black Friday?
Although small business may struggle to create a working strategy to
Black Friday, there is a couple of ways to convert the season in advantages and profits.
For instance, it’s good to clean up inventory. So, small business can experience the Black Friday to reduce prices on items that are overstocked and make room to products that are in higher demand.
Beyond that, small stores can take advantage of the holiday to get new clients. More sensible customers may look outside of big retailers for a different shopping experience and become regular clients.
One basic way to understand profit from Black Friday is consider the concept of Loss Leaders. That covers the idea that a retailer can lose money on items on sale and regain that margin making customers buy other items on store.
Not only that, but it also strengthens the relationship with customers, creating returning clients and people who will advocate for the brand.
The last trimester of the year is the most important for sales. It concentrates most of the revenue of many retailers. So, having a good strategy for Black Friday is a way to enter the period the right way.
Planning cautiously and considering demand forecasting, pricing and inventory projections is necessary to achieve profit as expected for the period. On the other hand, a lot of factors may influence in the result. But as exposed, the season can bring good results outside the margin of profit